Human capital is the present value of your future labour income — for most working Indians, it is the largest single asset on your balance sheet, far exceeding your financial portfolio. [2]
Because it is already part of your total wealth, it changes what your financial portfolio should look like.
Your financial portfolio needs to balance what your human capital already provides. [2]
| Your Income Type | Human Capital Behaves Like | What Your Financial Portfolio Should Do |
|---|---|---|
| Government / PSU employee | Long-duration bond | Tilt toward equity — the "bond" component is already large |
| Corporate employee, stable sector | Investment-grade bond | Balanced equity/debt |
| Business owner, cyclical income | High-yield equity | Tilt toward debt/gold for defence |
| Finance professional, markets-linked bonus | Equity (beta > 1) | Strong defensive tilt |
How correlated is my income with equity markets?
A stock-market trader's bonus falls exactly when their equity portfolio crashes — double pain. A school teacher's salary does not. The less correlated your income is with equities, the more equity risk your financial portfolio can safely carry. [2]
What is my time horizon?
A 30-year accumulator can hold 80–100% equity and ride out drawdowns. A retiree drawing down ~4% per year cannot afford a 40% equity crash — they would be forced to sell at the worst time. [2]
There is no universal right portfolio. The sequence is: [2]
Ratios → Goals → Allocation → Fund Selection
Most investors jump straight to fund selection. That is backwards.
Apply this → Go to Financial Planner → Ratio Analysis and compute your Savings Rate — definition">savings rate, debt-servicing ratio, and liquidity buffer first. Those three numbers tell you how much risk your overall financial position can bear — before you look at a single fund. [2]