15-65-20 Rule Explained: Simple Asset Allocation for Indian Investors

If you’re asking about the 15-65-20 rule, you’re probably hunting for a clean, plug-and-play way to split your money without getting lost in jargon. You want something you can set up this weekend, explain to your spouse in 60 seconds, and trust during messy markets. That’s exactly what this rule offers-but it’s a starting point, not a magic formula.

I’m based in Mumbai, and like many parents, I juggle SIPs, school fees, and the odd festival spending spike. A simple rule that keeps risk in check and still grows wealth? That’s the appeal. Here’s how the 15-65-20 split works and how to actually use it in India today.

TL;DR: What the 15-65-20 Rule Means

- 15% in Gold: Acts as an inflation and crisis hedge. In rupees, gold tends to hold up when stocks tumble.

- 65% in Equity: The main growth engine-Indian stocks (ideally via index funds) for long-term wealth.

- 20% in Debt: Stabilizer and emergency buffer (liquid funds, T-bills, target maturity funds, or PPF/EPF).

- Who it suits: Long-term investors (7+ years), moderate risk. Good for salaried Indians who want a simple, diversified core portfolio.

- What it is not: A law. If you’re very conservative or nearing retirement, 65% equity may be high. Adjust to your risk and time horizon.

Why this mix makes sense in India: Over long periods, Nifty 50 TRI has delivered double-digit CAGR (roughly 12-13% over 20 years per NSE data), Indian government bond yields hover near 7% (RBI data), and gold in INR has offered a non-correlated 8-9% type long-run return with spikes in crises (World Gold Council). Mixing the three reduces big drawdowns and smooths the ride.

How to Use the 15-65-20 Rule in India

This section turns the idea into a plan you can execute. Pick the products, set up SIPs, and automate rebalancing.

Step 1: Choose simple, low-cost products

• Equity (65%): One or two broad index funds or ETFs. Examples: Nifty 50 index fund, Nifty Next 50 index fund, or a total market index if your AMC offers it. Keep costs low (TER matters). Avoid chasing sector/theme funds.
• Debt (20%): Keep it clean and high-quality. Options: liquid funds for near-term buffers, ultra-short funds for slightly better yield, or target maturity funds (TMFs) holding G-Secs/SDLs to match known goals. PPF/EPF also fits this bucket.
• Gold (15%): Consider Sovereign Gold Bonds (SGBs) for 8-year holding (2.5% interest taxable, capital gains tax-free at maturity), or Gold ETFs/gold mutual funds if you want liquidity. Avoid physical coins/jewellery for investing-making charges, purity risk.

Step 2: Set your money flow

• Monthly SIP split: For every ₹10,000 you invest-₹6,500 to equity, ₹2,000 to debt, ₹1,500 to gold.
• Lumpsum? Stage it over 3-6 months to reduce timing risk, especially on the equity piece.
• Emergency fund: Keep 6 months’ expenses separately (savings + liquid funds). Don’t count this inside the 20% debt unless you must.

Step 3: Rebalance on a schedule, not by gut

• Annually or when any asset drifts 5 percentage points away from its target (e.g., equity hits 70% or drops to 60%).
• First try to rebalance using new SIP money. If not enough, switch between funds inside the same AMC to keep paperwork simple.
• Tax tip: Favor rebalancing inside equity funds after 1 year (to qualify for LTCG). For debt funds post-April 2023, gains are taxed at slab rates regardless of holding period; plan rebalances around your salary cycle to manage tax cash flow.

Step 4: Map goals to the same buckets

• Less than 3 years: Mostly debt; the 65% equity in the core portfolio may be too risky for short goals. Don’t stretch.
• 3-7 years: You can keep the 15-65-20 core, but consider nudging equity down to 50-55% as the goal gets close.
• 7+ years: The original mix works well for most people.

Step 5: Write a one-page rulebook for yourself

• Target weights: 15% gold, 65% equity, 20% debt.
• Allowed drift: ±5% each asset; rebalance annually or on breach.
• Product list: Exact fund names you will use.
• Stop-losses: None. You don’t sell because markets fall; you rebalance.
• Review date: One day a year, same month. No tinkering in between.

Why this discipline? Vanguard and other research houses show that simple annual rebalancing can control risk without killing long-run returns. You’re building a system that protects you from your own impulses.

Examples, Numbers, and a Quick Calculator

Let’s make it real with three profiles I often see around me in Mumbai-young earner, parent, and pre-retiree. Use them as templates, not prescriptions.

1) Fresh professional (age 27), Salary ₹80,000/month

• Goal: Build core wealth, maybe house down payment in 6-7 years.
• SIP: ₹20,000/month → Equity ₹13,000, Debt ₹4,000, Gold ₹3,000.
• Funds: Nifty 50 index + Total Market index; Liquid fund; Gold ETF.
• Note: Keep a separate “down payment” series in a target maturity fund matching the timeline. Don’t rely only on the core portfolio if the timeline is tight.

2) Parent (age 36) with a 9-year school + college plan

• Context: Fees spike. My daughter Anaya’s fees remind me why I keep debt for near-term goals.
• SIP: ₹40,000/month → Equity ₹26,000, Debt ₹8,000, Gold ₹6,000.
• Action: Ringfence school-fee money for the next 2-3 years in short-duration or TMFs. Keep the rest in the 15-65-20 core.
• Rebalance: Once a year after bonus month. Use bonus to top up the lagging asset.

3) Pre-retiree (age 52), 10 years to retirement

• Plan: Consider dialing equity down to 50-55% by retirement, increasing debt to 35-40%.
• Now: Start at 15-65-20 if you have the appetite, but glide down 2-3% equity per year from age 55.
• Income ladder: Build a 3-year cash/debt ladder for predictable expenses.

Back-of-the-envelope outcomes

• Assume long-term CAGRs: Equity 12%, Debt 6.5%, Gold 8% (illustrative, not promises).
• Blended expected CAGR near 10-10.5% for the 15-65-20 mix. Your actual path will zigzag; gold reduces drawdowns when equity is bleeding.

Quick mental calculator

• Monthly SIP x 12 x 10 ≈ 10-year invested capital.
• Multiply that by roughly 1.6-1.8 for a conservative 10-year wealth estimate at ~10% CAGR with SIPs (very rough; sequence matters).

Data and assumptions: Historical return ranges cited from NSE (Nifty TRI CAGRs), RBI (G-Sec yields), and World Gold Council for gold in INR. Past returns don’t guarantee the future.

Rebalancing, Taxes, and Pitfalls to Avoid

This is where most people either turn the rule into a durable plan-or accidentally wreck it.

Smart rebalancing

• Set a date: One day each year. Put it on your calendar. I do it after Diwali when cashflows are clearer.
• Use bands: ±5% drift. If equity hits 72%, move some to debt/gold. If gold swells to 20% after a spike, trim it.
• Source of funds: First try new SIP money or bonus. Then do switches. As a last resort, sell.

Tax basics (India, 2025)

• Equity mutual funds/ETFs: LTCG (holding ≥1 year) taxed at 10% above ₹1 lakh gains; STCG at 15%. STT applies.
• Debt mutual funds: For investments made on/after 1 April 2023, gains are taxed at your slab rate (no indexation benefit). Consider TMFs held to maturity to control volatility, though tax stays at slab.
• Sovereign Gold Bonds: 2.5% yearly interest is taxable at slab; capital gains on redemption at maturity (8 years) are tax-free. Secondary market liquidity is patchy-plan to hold.
• Gold ETFs/Gold funds: Taxed like debt at slab for post-2023 rules.
• PPF/EPF: EEE regimes within limits; use as part of the 20% debt if it fits your goals.

Pitfalls that break the rule

• Product creep: Adding too many funds. Two equity index funds, one debt solution, and one gold vehicle are enough for most.
• Risk mismatch: Keeping 65% equity when your goal is 2 years away. The rule is a core, not a straitjacket. Short goals demand more debt.
• Gold as jewellery: Don’t count ornaments as investment gold-charges and liquidity issues.
• Rebalancing by mood: If you skip rebalancing because markets are scary, you’re not following the rule.
• Ignoring costs: TER, exit loads, SGB bid-ask spreads. They add up over years.

Quick checklist

• Targets written down? 15% gold, 65% equity, 20% debt.
• Specific funds chosen? TERs checked?
• SIPs set with the exact rupee split?
• Rebalance date fixed and drift bands defined?
• Goal timelines mapped (short goals separated into safer debt)?
• Emergency fund topped up?

Decision nudge: Adjusting the mix

• Can you handle a 30-35% temporary drop in equity portion without panic? If not, push equity down to 50-55% and raise debt.
• Lumpy income (founders, freelancers)? Keep more debt (25-30%) and a larger emergency buffer.
• Already heavy in real estate? Consider staying near 15% gold or even 10%, since property can also respond to inflation, though differently.

FAQ and Next Steps

What exactly is the 15 65 20 rule? It’s a simple asset allocation guide: 15% in gold, 65% in equity, 20% in debt. It aims to balance growth and stability for Indian investors.

Is 65% equity too high? If your horizon is below 5 years or your sleep suffers in downturns, yes-dial equity down. For long-term goals (7+ years), 60-70% equity is reasonable for many investors, per typical advice from Indian financial planners and SEBI’s investor education principles around diversification.

Why not 60/40 like abroad? India’s growth and equity premiums have historically been higher than developed markets, and gold in INR adds a useful hedge. 15-65-20 is a local twist that many Indians find practical.

Can I skip gold? You can, but gold has historically cushioned falls when equities plunge and when INR weakens. World Gold Council’s India reports highlight this diversifier role. If you dislike gold, keep at least 5-10%.

Active funds or index funds? Use low-cost index funds for the core. If you love active, cap it at 20-30% of the equity sleeve and track performance versus a broad index for 3 years before adding more.

When do I sell? Only to rebalance or when a goal arrives. Otherwise, keep rolling.

What if markets crash right after I invest a lumpsum? That’s why staging into equity over months helps. Also, crashes are when rebalancing makes you buy equity cheaper using debt/gold.

Where do EPF/PPF fit? In the 20% debt bucket. If EPF already takes you above 20%, reduce debt funds accordingly and keep equity/gold intact.

Are SGBs always better than gold ETFs? For long-term holders who can lock in 8 years, SGBs win on taxes and the 2.5% interest. For flexibility and liquidity, ETFs are easier.

Do I need a demat? Not for mutual funds. For ETFs and SGBs in the secondary market, yes. You can also buy SGBs in primary issues via banks without demat.

How do I pick the actual funds? Choose well-known AMCs, low TER, tight tracking error (for index funds), and clean portfolios (for debt). Check SEBI disclosures and fact sheets. Avoid fancy strategies you don’t fully understand.

Your next 60 minutes

1. Open your existing folios and list current holdings by % in equity/debt/gold.
2. Decide your exact products: 2 equity index funds, 1-2 debt solutions, 1 gold vehicle.
3. Set SIPs in the 65/20/15 split. Adjust future SIP dates to a single day for easy tracking.
4. Mark an annual rebalance date. Write drift bands in your notes.
5. Separate any goal under 3 years into safer debt now.

If something goes wrong

• Equity shoots beyond 75% after a rally? Stop equity SIPs for 2-3 months, direct them to debt/gold, and rebalance the excess.
• Gold slumps and sits at 10%? Top it up via SIPs until it’s back near 15%-that’s the point of diversification.
• Debt fund NAV dips? Check credit quality. If it’s a high-quality fund and the dip is rate-driven, stay the course or use TMFs if you prefer defined maturities.
• Feel anxious anyway? Write out your worst-case fear, the actual numbers (not headlines), and what your rulebook says. Then act on the rulebook.

One last nudge. A rule works only when it’s boring. The 15-65-20 split isn’t meant to impress anyone at a party. It’s meant to quietly build wealth while you live your life-school fees, monsoons, and all.