12:20:80: Formula to boost your financial immunity

Protecting your financial health is key to a happy and successful life. Just as good physical health cannot be achieved in a day, financial immunity takes time to build. Increasing exposure in equity when the markets are witnessing an uptrend and untimely redemptions at the time of a downside can damage your portfolio returns.

How can you make sure your investments are protected from short term volatility and market fluctuations? While investors can't always time the market, there are some ways that can help them boost their financial immunity. Having an emergency fund or money set aside for emergencies, adequate health insurance and a strategically diversified portfolio can be some of them.

Splitting up your assets in the right proportion among different asset classes plays a crucial role in building the desired financial immunity for investors. Overexposure to a single asset (like equity) or zero allocation to another asset (like gold) can both have negative implications on your financial planning and derail your investment plans.


To build financial immunity, investors need to follow an effective strategy and diversify their portfolio across different asset classes like equity, debt and gold. While equity is best for the long term and should have a significant chunk of your investments, gold may act as a hedge against a falling economy and inflationary pressures. Generally gold prices go up when interest rates are falling, which is directly proportional to the strength of the economy.

Right asset allocation strategy helps investors mitigate downside risks and take advantage of market movements. Three simple steps of asset allocation can help you tide over any challenge that might keep you away from achieving your financial goals.

These 3 steps are based on the 12:20:80 fundamental of Asset Allocation which stands for: 12 months of expenses; 20 percent investment in gold and 80 percent in equity.

Step 1: The safe money
The first step in any investment journey begins with a contingency plan and 12 months of emergency funds constitutes for the first criteria for the rule. You can park this money in an open-ended liquid mutual fund which might give you returns similar to your friendly neighbourhood bank. Liquid Funds typically invest in government securities, certificate of deposits, debt and fixed income securities. Quantum Liquid Fund is one such liquid fund that offers you the Insta Redemption facility to liquidate (up to Rs.50K) whenever you need it. Since this fund takes minimal credit and interest rate risk and has a portfolio of AAA/A1+ rated PFI/PSU bonds and quality government securities with a duration not exceeding 91 days, it qualifies as a Safety or the Foundation block of your portfolio.

Step 2: Don’t ignore Gold
Second step constitutes 20 percent strategic investment in gold funds. After setting aside an emergency corpus, you need to make some provisions to lower downside risks for your investment against volatility and inflation. Gold not only helps investors get the much-needed diversification but is also beneficial due to gold’s risk-reducing, return-enhancing characteristics. Investors can consider Gold ETFs or Gold Fund of Fund for a cost effective and liquid investment. Quantum Gold Fund ETF is backed by pure Gold of 99.5% finesse. As a step ahead, the fund also undertakes regular independent purity tests of all gold bars. Investors also have the option of investing without a demat account with the Quantum Gold Savings Fund.

Step 3: Equity is must
Third and the final step stands for 80 percent investment in a diversified equity portfolio that has the potential to help you reach your financial goals over the long term. Within equity, investors need to make sure their portfolio doesn't have bias towards a sector or style. Investors can look in Quantum Equity Fund of Funds that simplifies your equity mutual fund selection needs by investing in 5-10 well-researched diversified funds of third-party equity mutual funds. Some portion of the equity portfolio (15%) can be in Value Funds which allows you to reduce downside risk with a portfolio that is at a discount to its intrinsic value based on the historical average. Such a fund is our flagship fund Quantum Long Term Equity Value Fund. And another 15% can be allocated to alternate funds like ESG. ESG Funds focus on non-financial parameters like Environmental, Social & Governance of a stock. Invest , one of the earliest funds in the ESG space that uses its own proprietary ESG scoring methodology developed through our own learning curve in the ESG space and evolving our integrity filter founded since 1990s at the Group Level.

Quantum Mutual Fund’s 12:20:80 Rule for Asset Allocation not only helps in diversifying but also helps to boost investor’s financial health.

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