How much of your wealth should be invested in equities? Ask most financial planners and the answer will depend on your age, goals and risk appetite. Ask veteran investor Shankar Sharma and the answer is much simpler—no more than 5-10% of your disposable net worth.
Recently, in an interview with Financial Express, the founder of GQuant Investech said retail investors should keep no more than 5-10% of their disposable net worth in equities, a number far lower than what most financial planners recommend.
It is not the first time Sharma has expressed this view, but his latest remarks have once again sparked a debate on how much equity exposure is right for retail investors.
Sharma’s case rests on more than caution. He argues that equity markets suit richer economies with strong social safety nets, not India, where most households have limited financial security to fall back on. He also points out that the market’s long-term average return of around 14% a year over three decades hides an uncomfortable truth: most of that gain came from just two windows, the 2004-07 bull run and the 2020-24 rally. Take those years out, he says, and the average looks a lot less impressive.
SIPs enter his argument too, though as a second point rather than the main one. He believes the surge in retail SIP inflows has quietly become a convenient exit route for foreign portfolio investors, letting them sell into steady domestic buying instead of India attracting fresh foreign capital.
His comments have reopened a debate most financial planners thought was settled. So should investors actually cut their equity exposure?
We put Sharma’s views to two market experts, Kunal Shah, Senior Technical Research Analyst at Mirae Asset Sharekhan; and Mukesh Kumawat, Executive Director at Anand Rathi Wealth Limited. Both push back, though neither dismisses his concerns outright.
There is no one-size-fits-all number
The first problem experts have with Sharma’s advice is the idea of a flat percentage that applies to everyone.
Shah does not agree with fixing equity exposure at 5-10% across the board. “No, I do not agree with it since financial planning and asset allocation depends on lot of factors,” he says. He adds that “most advisors size equity allocation using factors like age, income stability, time horizon, liquidity needs, and risk appetite — not a flat percentage for everyone.”
According to Shah, “A blanket 5-10% ignores that a 25-year-old salaried professional has a vastly different capacity for risk than a 65-year-old retiree.”
Kumawat starts from a different point altogether. Instead of net worth, he believes the real question is when an investor will need the money. “Investors should base their asset allocation decisions on their investment horizon, not on their net worth,” he says.
A retirement corpus needed 20 or 30 years away can carry far more equity than money required in the next two or three years, because “the role of equity is to create long-term growth while debt provides stability.” For long-term investing, Anand Rathi Wealth believes “an allocation of 80% in equity and 20% in debt is ideal.”
Are Indians really overexposed to equities?
Sharma’s advice assumes ordinary investors already have too much money riding on the stock market. The data tells a different story.
Shah points out that “aggregate national data doesn’t support ‘too much’ equity exposure across the population.” In fact, he says, “historical under-allocation to equities relative to real estate and gold has been a long-standing structural feature of Indian household savings.”
Kumawat backs this up with numbers from the Reserve Bank of India. “As of March 2026, physical assets such as gold and real estate accounted for nearly 63% of household wealth, while financial assets made up just over 37%. Within that financial allocation, direct equity and equity mutual funds together represented only about 5.3% of total household wealth. Gold alone accounted for around 28%, real estate for more than 27%, and even bank deposits, at about 12%, have a much larger share than equity.”
He says, “Hence, we can see that that most household wealth is concentrated in physical and defence assets rather than growth assets. Though the proportion of allocation to equity has certainly increased over the past decade, we believe investors are still heavily under-allocated to the same.”
What about SIPs?
Sharma’s sharpest line isn’t really about SIPs as a tool. It’s about what SIP money does once it enters the market. He believes the steady wall of retail SIP buying gives foreign investors an easy, liquid exit whenever they want to sell India, turning a capital-starved economy into a source of liquidity for outsiders rather than a magnet for their money.
Shah separates the mechanism from the marketing. “There’s a reasonable distinction between the mechanism (SIPs) and the broader trend of financial institutions encouraging aggressive equity allocation as a blanket solution,” he says.
He agrees that mis-selling, where unsuitable investors get pushed into equity they cannot handle, is a real concern. But his conclusion is different from Sharma’s: “this argues for better suitability assessment and investor education, not for discarding SIPs or equities as a wealth-building tool.”
Kumawat makes the case for SIPs with numbers. “For long-term goals such as retirement or children’s education, SIPs in diversified equity mutual funds remain one of the most effective ways to build wealth because they remove the need to time the market and encourage disciplined investing.”
“Since 2012, Nifty 50 has delivered average returns of over 12%, with a Sharpe ratio of 1.26, indicating that investors have been well compensated for the risk taken.
In fact, over 10-year periods, Nifty 50 has had a more than 98% chance of delivering returns above 12%. At that rate of return, an investor contributing ₹10,000 every month for 15 years would build a corpus of nearly ₹49 lakh against a total investment of ₹18 lakh. This is why SIPs are one of the most effective ways to create long-term wealth.”
Do a few bull-market years make equity returns misleading?
Sharma’s point about the 2004-07 and 2020-24 rallies carrying India’s long-term returns is hard to argue with on the numbers. Where experts differ is on what that fact actually means for an investor.
“It’s true that long-term equity index returns can be disproportionately influenced by a handful of strong years, and sequencing matters,” Shah says. “This is a legitimate observation about return distribution, not randomness.” But he sees it as an argument for staying invested, not for staying out.
“This is precisely the argument in favor of SIPs and long-term holding — since no one can reliably predict which years will be the strong ones, staying invested consistently over a long horizon captures those outsized years whenever they occur, rather than trying to time them. Volatility clustering is a reason to diversify and stay disciplined, not necessarily a reason to abandon equity allocation altogether,” says Shah.
Kumawat makes a similar point using India’s own correction history. “We believe that SIP investing is the ideal path for long term wealth creation because volatility has always been part of the journey. Since 2001, Nifty 50 has seen an average decline of about 18% every year, with these corrections lasting around three months. Yet investors who stayed invested were rewarded over time.”
Following these corrections, he says, the average return over the next one year has been around 32%, 20% over the next three years and 17% over the next five years. “This shows that corrections are a normal part of the market cycles and reinforces why patience and disciplined investing are the most reliable drivers of long-term wealth creation.”
Could 5-10% equity exposure hurt long-term goals?
The biggest question for an ordinary investor is what actually happens if they follow Sharma’s advice.
Shah warns that a young investor gives up a lot by staying this conservative. “Restricting equity exposure to 5-10% would mean the bulk of wealth compounds at lower nominal returns… likely resulting in a meaningfully smaller retirement corpus compared to a more balanced or equity-tilted portfolio.” He adds that such an investor may end up having to save a much larger share of their income just to reach the same goal.
Kumawat lays out the arithmetic with a real example. “Think of a 30-year-old investing ₹15,000 every month for 20 years. With only 10% allocated to equity and the remaining 90% invested in debt, the portfolio grows to roughly ₹82 lakh. If the same investor allocates 80% to equity and 20% to debt, the corpus grows to ₹1.34 crore without increasing the monthly investment.”
If we assume inflation to be 6%, the conservative portfolio is worth only about ₹25.5 lakh in today’s purchasing power, while the higher equity portfolio retains close to ₹42 lakh. Hence, having equity as the primary allocation in the portfolio allows an investor to beat inflation over the long term.”
The inflation challenge
There is a reason planners keep coming back to equity for long-term goals, and it isn’t just about higher returns. It’s about what inflation quietly does to money sitting in safer assets.
Shah says debt and gold have not always kept pace. “Traditional fixed-income instruments and even gold have, over multi-decade periods, sometimes delivered returns close to or only marginally above inflation, especially after tax.” Equities, he says, have historically been “one of the few asset classes capable of generating meaningfully positive real returns over long horizons.”
Kumawat puts a number on the gap.
“The biggest challenge with an overly conservative portfolio is that inflation erodes a lot of that growth over time. Retail inflation in India has averaged close to 6%, while fixed deposits and debt mutual funds deliver returns of around 6.5% to 7%.,” he says, adding that once real return is reduced when inflation is taken into account.
“If we take the same example as above, a portfolio with only 10% in equity generates a real return of roughly 1.5% a year after adjusting for inflation, meaning purchasing power improves only marginally despite two decades of investing. A portfolio with a higher allocation to equity generates a real return of more than 5% a year under the same assumptions, allowing wealth to compound over long periods. For long term goals such as retirement, children’s education or financial independence, equity is the primary growth engine.”
So, what should investors do?
Sharma’s interview has done what a good contrarian take should do: force a second look at assumptions that had gone unquestioned for years. Both experts agree with at least part of his message. Investors should not pile into equities just because markets have done well lately, or because everyone else is doing it.
Where they part ways with him is on the fix. A flat 5-10% ceiling, applied to every investor regardless of age or goals, is not what either expert would recommend. The more useful exercise, they say, is working out how much equity actually fits your own timeline and appetite for risk, rather than picking a number because a well-known investor said so.
For most people saving toward something 15 or 20 years away, the message from both experts is much the same as before Sharma’s comments: equity remains the one asset that has reliably grown faster than inflation over the long run, and staying invested through the bad years is usually what makes the good years count.
Disclaimer: This article is for informational purposes only. The views expressed by the experts quoted are their own and are intended to provide general guidance. Investment decisions should be based on your financial goals, risk appetite and investment horizon. Please consult a qualified financial adviser before making any investment decisions.
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