The 70-30 rule: 70%Equity - 30% Debt

The 70-30 rule is a very effective rule and one should adopt in their investment style. It helps to maintain and grow your portfolio thru good and bad times.

What is the 70-30 rule? It means you invest 70% of your portfolio into equity and 30% of your portfolio into debt. So when equity goes above 70%. sell some of your equity and buy debt and level out. Similarly, when debt increases beyond 30%. sell some debt and level out. So, you rotate money between equity and debt. This rule has an advantage. when the market is bad and stock markets have crashed, you still have cash in the form of debt to buy equity at lower prices. and when the market is booming, you book some profits and buy debt.This way your portfolio grows in size.

What is Equity? Equity is direct shares of companies and equity mutual funds.

What is Debt? These are Corporate Bonds. Govt. Bonds. Treasury bills. Bond mutual funds. etc. Basically you are loaning your money to the Government or Companies. Always buy good quality and good rated bonds. AAA rated bonds are the safest. Any bond below BBB rating is junk quality.