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Why Most Indians Don’t Use a Financial Planner (And What It’s Costing Them)

Hemant Beniwal
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Why Most Indians Don’t Use a Financial Planner (And What It’s Costing Them)

“An expert is someone who has made all the mistakes which can be made in a very narrow field.” – Niels Bohr

Every year I meet investors who have been managing their own finances for 10-15 years. Most have some mutual funds, an insurance policy or two, a home loan, and a vague retirement plan. When I ask them what their retirement corpus target is and whether they are on track, most cannot answer the question.

They are not financially illiterate. They read about finance. They follow markets. They have opinions on funds and sectors. What they lack is not knowledge – it is an integrated picture of their financial position relative to their specific goals.

The reasons most people give for not engaging a financial planner are consistent and worth addressing directly.

⚡ Quick Answer

The five most common reasons people avoid financial planners are: the fee feels like an unnecessary expense, the belief that self-management is sufficient, distrust of advisors who push products, the assumption that planners are only for the wealthy, and reluctance to share financial information with strangers. All five are understandable – and all five miss the real question, which is not “can I manage myself?” but “what is the cost of managing myself sub-optimally over 25 years?”

Why people avoid financial planners India - real objections addressed

Objection 1: “It Is an Unnecessary Expense”

Financial planning fees range from Rs 15,000 to Rs 1 lakh per year depending on the advisor and the complexity of the engagement. For someone earning Rs 3-5 lakh per month, this is a small fraction of income. But it still feels like an avoidable cost – because the value is invisible until you have it.

The relevant comparison is not “what does advice cost?” but “what does the absence of good advice cost?” Research consistently shows an annual behavioural gap of 1-2% between what markets return and what the average self-directed investor actually receives – because they buy high, sell low, hold the wrong products, and miss tax optimisation opportunities. On a Rs 1 crore portfolio, 1.5% is Rs 1.5 lakh per year. That is the cost of not having professional guidance, compounding silently every year.

I have a financial planner myself – even after 25 years of advising others. The reason is simple: I am too close to my own financial decisions to be objective about them. Everyone is.

Objection 2: “I Can Do It Myself”

This is the most common objection, and the most worth examining honestly. The question is not whether you have the intelligence or the discipline – many self-directed investors have both. The question is whether you have the time, the complete knowledge base, the emotional detachment, and the systematic process to manage an integrated financial plan covering investments, insurance, tax planning, estate planning, and retirement withdrawal strategy simultaneously.

Consider what financial planning actually involves: maintaining appropriate asset allocation across multiple goals with different timelines, reviewing insurance adequacy annually, optimising between old and new tax regimes, planning for retirement corpus drawdown (not just accumulation), ensuring estate documents are current, and making decisions without emotional interference during market extremes.

Most self-directed investors manage one or two of these well and neglect the rest. The typical gap is not in investments – it is in insurance (systematically under-insured), tax planning (done in panic in March), and retirement withdrawal planning (rarely considered at all until retirement is imminent).

The question is not “can I manage my own money?” The question is “what is the true cost of managing it sub-optimally?”

RetireWise builds integrated financial plans for senior executives who want more than product recommendations – they want a complete picture of where they stand and what it takes to get where they want to go.

See How RetireWise Works

Objection 3: “Advisors Push Products, Not Advice”

This is a legitimate concern – and historically, a well-founded one. Many people who call themselves financial advisors in India are product distributors: bank relationship managers, insurance agents, and mutual fund agents whose income is linked to the products they recommend. Their incentive is to recommend what pays them most, not what serves you best.

The solution is not to avoid all advisors. It is to choose the right kind. SEBI-registered Investment Advisers (RIAs) operate under a fiduciary obligation – they are legally required to act in the client’s best interest. SEBI RIAs charge fees for advice rather than earning commissions from product manufacturers. The category exists precisely to address the conflict-of-interest problem in financial advice.

Before engaging any financial advisor, ask two questions: Are you registered with SEBI as an investment adviser? How are you compensated? The answers reveal whether the incentive structure is aligned with your interests.

Objection 4: “Financial Planners Are Only for the Wealthy”

This is a misconception that is worth correcting directly. Financial planning is most valuable for people who have not yet built their wealth – because it is the planning that determines whether wealth is built. A 35-year-old with Rs 20 lakh in savings and a Rs 2 crore retirement goal needs a plan more urgently than a 60-year-old with Rs 3 crore who has already arrived.

The decisions that determine financial outcomes are made in the accumulation years – in the 30s and 40s – not in retirement. How much you save, how you allocate between goals, whether your insurance is adequate, and whether your tax planning is systematic: these decisions compound over 25 years. Getting them right early produces dramatically better outcomes than getting them right at 58.

Objection 5: “I Don’t Want to Share My Financial Information With a Stranger”

This is understandable. Financial information is private. Sharing income, assets, liabilities, family obligations, and estate details with an advisor requires a level of trust that takes time to build.

The practical approach: start with a limited initial engagement. Many advisors offer a one-time financial review or a specific goal analysis before any ongoing relationship begins. This lets you evaluate the quality of the advice and the professionalism of the advisor before sharing your complete financial picture.

The information shared with a SEBI-registered adviser is also subject to confidentiality obligations under SEBI regulations. It is not more exposed than the information you share with your bank, your employer, or your tax consultant.

When You Genuinely Do Not Need a Financial Planner

There are circumstances where the value of professional planning is lower. If you have recently started earning with no dependants and simple finances, the basics – term insurance, health insurance, SIP in 2-3 diversified equity funds, emergency fund – can be set up without professional guidance. If you are an expert in financial planning yourself and can manage your decisions without emotional interference, self-management may be appropriate.

For most others – especially senior professionals with complex income, multiple goals, significant assets, and approaching retirement – the cost of professional advice is small relative to the improvement in outcomes it typically produces.

Read: 10 Questions to Ask Before Managing Your Own Investments

The most expensive financial advisor is not the one who charges a fee. It is the one you do not have – whose absence you pay for silently, in suboptimal decisions, missed tax savings, and inadequate insurance, for 25 years.

DIY = Destroy It Yourself. At least, for most people. Know which one you are.

What would a complete picture of your financial position actually show?

RetireWise starts with exactly that question – a full review of where you are, where you need to go, and what it takes to get there. No product pitch. Just the honest picture.

Book a Free 30-Min Call

Your Turn

Which of the five objections above resonates with you – and has your position on financial advice changed after reading this? The honest answer often reveals more about financial readiness than any checklist. Share in the comments.

When Interest Rates Fall: How to Protect Your Retirement Income

Hemant Beniwal
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When Interest Rates Fall: How to Protect Your Retirement Income

“An investment in knowledge pays the best interest.” – Benjamin Franklin

My retired Tauji, my father’s cousin’s brother, was in for a shock when he went with my cousin to renew his non-cumulative 5-year fixed deposit.

The deposit rate offered to him was a mere 6.20% (including the added 0.60% applicable for senior citizens) for a deposit of more than five years. It was a drop of 2.80% from 9.00%, which he got on a 5-year deposit in 2015 – a 31% cut in his annual income overnight.

The back of the envelope calculation showed that he would lose Rs 2,800 annually for every one lakh rupee deposit. That meant an Rs 28,000 hit annually for a deposit of 10 lakhs, Rs 42,000 for 15 lakhs, and Rs 56,000 for a 20 lakh deposit.

For a retired but independent man, a loss of annual income by more than thirty percent was nothing less than a punch below the belt.

Since he retired in 2011, he never thought he would need anything more than his safely deposited retirement corpus interest income. He had no rental income either, having preferred investing in his children’s education over building property.

⚡ Quick Answer

Interest rates follow cycles. A retirement plan built entirely on fixed deposits will see income rise and fall with those cycles. The protection strategy is not to chase the highest current rate but to build a layered income portfolio: a short-term bucket for immediate needs, medium-term government-backed instruments, and a long-term equity allocation that grows through rate cycles. The goal is income stability over decades, not the best rate this quarter.

Falling interest rates retirement income protection India

Why Interest Rates Fall

Interest rate cycles are a permanent feature of any economy. They are not emergencies. They are the normal operating condition of a market economy where the central bank adjusts the cost of borrowing to manage growth and inflation.

What catches retirees off guard is the mismatch between how long their retirement lasts and how fixed their income assumptions are. Tauji expected 9% forever. The market only guaranteed it for five years. When the FD matured, the world had moved.

The current rate environment in 2026 sits at a different point in the cycle. The RBI repo rate has moved through its own arc since the COVID lows of 4% in 2020, rising to 6.5% and now entering a gradual easing phase as inflation moderates. The lesson from every cycle: the income your corpus generates will change. Your expenses will not be so accommodating.

Read: PMVVY – Closed for New Investment. Here Are Your Best Alternatives

The Impact on Savings and Investments

When rates fall, banks cut savings account rates first and deposit rates soon after. The savings account rate at most large banks is currently in the 2.5-3.5% range. For a retiree keeping Rs 5 lakh in savings “just in case,” that represents an annual opportunity cost of Rs 20,000-25,000 compared to a liquid fund or short-term FD.

Retirees on fixed income face a compounding problem: falling rates reduce income at the same time that inflation continues to erode purchasing power. The double squeeze is what my Tauji experienced. His nominal income fell while his expenses kept rising.

falling interest rates investment options India retirees

Post-Office Savings Schemes

The India Post network remains one of the most underused tools for senior citizen income protection. The government backing and competitive rates make it a first stop, not a last resort.

The Senior Citizens Savings Scheme (SCSS) currently pays 8.2% per annum, paid quarterly. This is among the highest guaranteed rates available from a sovereign-backed instrument in India. The maximum deposit limit is Rs 30 lakh per individual (Rs 60 lakh for a couple investing jointly). Interest is taxable but the rate more than compensates for most investors in lower tax brackets.

The Post Office Monthly Income Scheme (POMIS) pays 7.4% annually in monthly instalments, making it useful for those who need a regular cash flow rather than quarterly lump sums. Maximum deposit is Rs 9 lakh for a single account and Rs 15 lakh for a joint account.

The PPF remains the cornerstone long-term instrument at 7.1% tax-free. Not directly a retirement income tool due to the 15-year lock-in and annual deposit limits, but highly relevant for anyone in the 5-10 years before retirement who is still building the corpus.

High-Yield Savings Accounts

Some small finance banks and newer-generation banks continue to offer 6-7.5% on savings accounts with certain balance thresholds. This is materially higher than the 2.5-3% at large PSU banks. The trade-off is slightly higher institutional risk compared to SBI, though small finance banks are also regulated by RBI and covered by DICGC deposit insurance up to Rs 5 lakh.

For a retired household, keeping one account at a large bank for day-to-day transactions and a second savings account at a small finance bank for surplus liquidity is a practical approach. The rate difference on Rs 10-15 lakh can amount to Rs 40,000-60,000 annually.

Government Bonds and Gilt Funds

RBI Floating Rate Savings Bonds currently pay approximately 8.05% per annum, paid semi-annually. The rate resets every six months based on NSC rates. These are sovereign instruments with no credit risk, available in multiples of Rs 1,000 with no upper limit. The limitation is that they are not transferable and redemption before 7 years is restricted based on age.

For those comfortable with mutual funds, short-duration gilt funds and dynamic bond funds provide a way to participate in the rate cycle without taking credit risk. When rates fall, bond prices rise and fund NAVs increase. The key discipline is holding through the rate cycle rather than selling at the wrong point.

The Debt Fund Tax Change You Need to Know

Budget 2023 changed the tax treatment of debt mutual funds. From April 1, 2023, gains from debt funds held for any duration are taxed at the investor’s slab rate. The earlier benefit of 20% LTCG with indexation after 3 years is no longer available. This makes debt funds less tax-efficient for investors in the 30% tax bracket. For them, bank FDs and post office schemes now offer a comparable after-tax return with simpler execution.

Exception: Debt funds bought before April 1, 2023 retain the old tax treatment for those units. New purchases after that date fall under slab-rate taxation.

Hybrid Funds: The Long Game

A retirement portfolio that is 100% fixed income is not safe. It is fragile. It looks safe until inflation quietly destroys purchasing power over a decade.

Consider a retiree in 2010 who put everything in FDs at 9%. By 2020, rates had fallen to 5.5-6%. His corpus grew at a rate that did not keep pace with the cost of medical care, which was inflating at 8-10% per year. He did not lose capital. He lost purchasing power. That is a slower, quieter version of the same problem.

Hybrid funds – balanced advantage funds and conservative hybrid funds – maintain a meaningful equity component (25-40%) alongside debt. Over a 5-7 year period, the equity portion grows through market cycles and compensates for the lower yields on the debt portion. A conservative hybrid fund has historically delivered 9-11% CAGR over 10-year periods, compared to 6-7% from debt-only portfolios.

For a 60-year-old retiree, a 20-30% allocation to hybrid funds alongside SCSS, RBI Floating Rate Bonds, and a liquid emergency fund is a reasonable structure. The exact allocation depends on the retirement corpus size, other income sources, and lifestyle expenses.

Read: Benefits of Long-Term Orientation in Life and Investing

The Systematic Withdrawal Plan Alternative

For retirees with a larger corpus, a Systematic Withdrawal Plan (SWP) from a balanced advantage or conservative hybrid fund can replicate the monthly income experience of a fixed deposit while accessing equity growth over the long term.

The principle: invest the corpus in a hybrid fund, set up a monthly SWP for the required income, and let the remaining corpus grow. When the fund grows faster than the withdrawal rate, the corpus appreciates. When markets are flat or negative, the corpus depletes slightly but recovers.

A Rs 1 crore corpus in a conservative hybrid fund with an 8% annual SWP (Rs 8,333 per month) has historically sustained withdrawals for 20+ years in most market scenarios, compared to an FD-only corpus at 6.5% rates which would be meaningfully depleted by year 15-16. The SWP approach requires comfort with month-to-month NAV fluctuation. It is not for those who need the certainty of a guaranteed number on the passbook.

Your retirement income plan should survive a 2% rate cut. Does yours?

A stress-tested retirement income plan accounts for rate cycles, inflation, and healthcare costs. That is what RetireWise builds.

See How RetireWise Plans Retirement Income

What Tauji Should Have Done Differently

Tauji is not unusual. Most people who retired in the 1990s and 2000s built their retirement plans around FD rates that prevailed when they were working. Those rates did not persist. The plan was not stress-tested against rate cycles.

The fix is not complicated but it requires acting before the rate environment changes, not after. A layered approach would have served him better: SCSS for the first bucket of regular quarterly income, RBI Floating Rate Bonds for medium-term stability, and a modest allocation to hybrid funds for long-term corpus preservation against inflation. The FD would have been a smaller part of a diversified income stream rather than the whole plan.

The deeper lesson: your retirement income plan should not be a single instrument strategy. It should be an architecture – different instruments doing different jobs across different time horizons, coordinated to produce stable income regardless of what the RBI does at any particular meeting.

Interest rates will fall again. They always do. The question is whether your retirement income plan survives the cycle or depends on it.

Build an architecture, not a bet.

Retirement income planning is more than picking the highest FD rate.

RetireWise builds structured income plans for Indian executives that are designed to last 25-30 years, not just the current rate cycle.

Book a Free 30-Min Call

Your Turn

What percentage of your retirement income currently comes from FDs? And what is your plan if rates fall another 150-200 basis points from here? Share in the comments.

Should Indians Invest in Gold? The Right Role of Gold in Retirement Planning

Hemant Beniwal
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0
Should Indians Invest in Gold? The Right Role of Gold in Retirement Planning

“Gold is the money of kings, silver is the money of gentlemen, barter is the money of peasants – but debt is the money of slaves.” – Norm Franz

In early 2024, gold crossed Rs 70,000 per 10 grams for the first time. By early 2025 it had crossed Rs 80,000. By the time this post was updated in April 2026, gold was trading above Rs 90,000 per 10 grams.

Every time gold makes a significant run, I start getting calls from clients asking the same question: “Should I buy more gold now?”

And every time, my answer is the same: “That depends on why you want to hold gold – and more importantly, whether you understand what gold actually is in a portfolio.”

Gold in India occupies an unusual space. It is emotional, cultural, and financial simultaneously. Separating these three aspects is the starting point for any rational decision about it.

⚡ Quick Answer

Gold serves one primary role in a retirement portfolio: diversification and crisis hedge. It tends to preserve value when equities fall sharply, currencies weaken, or geopolitical stress is high. It is not primarily a return-generating asset – over long periods, gold’s real returns (after inflation) are modest. The right allocation for most retirement portfolios is 5-10% of the total portfolio in gold, held as Sovereign Gold Bonds or Gold ETFs rather than physical jewellery. Do not buy gold because prices have risen recently – that is speculation, not planning.

Gold investment for retirement - how much to hold and in what form

What Gold Is and What It Is Not

Gold is a store of value and a crisis hedge. It is not a growth asset.

Over very long periods – decades – gold has roughly maintained its purchasing power in real terms. An ounce of gold bought a fine toga in ancient Rome; an ounce of gold buys a fine suit today. This purchasing power preservation over centuries is gold’s genuine superpower.

But over investment-relevant periods of 10-20 years, gold’s inflation-adjusted return is modest and variable. Between 2012 and 2018, gold delivered negative real returns in India for much of that period – a six-year stretch where simply staying in a fixed deposit would have outperformed. Between 2019 and 2024, gold delivered exceptional returns driven by Covid uncertainty, global inflation, and geopolitical stress.

The unpredictability of gold’s short and medium-term returns makes it unsuitable as a primary wealth-building vehicle for retirement. A retirement corpus needs consistent, compounding growth over 20-25 years. Gold cannot reliably deliver that.

What gold can reliably deliver is low correlation with equities. When stock markets fall sharply – as they did in 2008, 2020, and during acute geopolitical events – gold tends to hold value or rise. This counter-cyclical behavior is its genuine portfolio value.

Physical Gold vs Paper Gold: The Practical Choice

Most Indians hold gold as jewellery. This is not an investment. It is consumption. The making charges (10-25% of jewellery value), wear and tear, purity uncertainty, and storage cost make jewellery unsuitable as a financial asset. You will not sell your wife’s wedding jewellery when gold prices are attractive. Therefore, jewellery should not be counted in your investment portfolio.

For investment purposes, paper gold options are far superior:

Sovereign Gold Bonds (SGBs). Issued by RBI on behalf of the Government of India. The bond pays 2.5% annual interest (taxable) on the face value, which no other gold investment does. At maturity (8 years), redemption is entirely tax-free. This combination of gold price participation plus 2.5% interest plus tax-free maturity makes SGBs the most efficient way to hold gold for long-term investors. The RBI has reduced new SGB issuances since 2024, so secondary market purchases on exchanges are the available route for new investors.

Gold ETFs. Gold ETFs track physical gold prices with high purity (99.5%). They can be bought and sold like shares on NSE/BSE. They carry an expense ratio (typically 0.5-1%) and are subject to LTCG tax (after 24 months of holding). More liquid than SGBs but less tax-efficient for long-term investors.

Gold mutual funds. Fund of funds that invest in Gold ETFs. Useful for investors who want to do SIP into gold but do not have a demat account. Slightly higher expense than direct ETF purchase but offer SIP convenience.

“I have seen clients buy gold at Rs 55,000 because prices were rising, then panic when it corrected to Rs 45,000. Gold bought for the wrong reason – recent price momentum – produces exactly the wrong investor behaviour. The patient, systematic allocation works. The reactive purchase never does.”

– Hemant Beniwal, CFP, CTEP | Founder, RetireWise

How Much Gold Belongs in a Retirement Portfolio

There is no universal answer, but a general framework works for most Indian retirement investors: 5-10% of the total investment portfolio in gold. This allocation provides meaningful diversification benefit without over-allocating to a non-yielding asset.

Below 5%: the diversification benefit is real but small. The allocation is too minor to matter in a market crisis.

At 5-10%: the allocation provides meaningful protection during equity bear markets and currency depreciation, while not significantly dragging long-term portfolio returns.

Above 15-20%: the allocation becomes a meaningful drag on long-term returns because gold does not compound the way equity does. A portfolio that is 30% gold is sacrificing decades of compounding for defensive comfort that could be achieved at lower cost.

The allocation should also account for existing physical gold held (jewellery inheritance, accumulated purchases). Many Indian families already have implicit gold exposure far in excess of 10% of net worth through inherited jewellery. For these families, additional paper gold investment may be unnecessary.

Does your retirement portfolio have the right gold allocation?

A RetireWise retirement plan determines the appropriate gold allocation for your specific portfolio, accounting for existing physical holdings and your overall asset mix.

Book a Free 30-Min Call

The Indian Context: Why Gold Feels Different Here

In India, gold is not just a financial asset. It is cultural currency – associated with prosperity, auspicious occasions, family wealth transfer, and social signalling. This cultural layer means decisions about gold are rarely purely financial.

A useful distinction: gold as cultural obligation vs gold as investment. Buying gold for a daughter’s wedding, as part of family tradition, is a cultural obligation – budget for it separately from your investment portfolio. Buying gold as a systematic, disciplined allocation to hedge your equity portfolio is an investment decision – apply financial logic to it.

Mixing the two creates confusion. The cultural gold purchase gets justified with investment rationale. The investment allocation gets influenced by cultural enthusiasm. Keeping them separate produces better decisions in both domains.

Read – ETF and Index Funds India: The 2026 Guide for Retirement Investors

Read – Long Term vs Short Term Investments: The Only Framework You Need

Frequently Asked Questions

With gold above Rs 90,000 per 10 grams, is it too late to buy?

If you are buying gold to reach a target allocation (say, from 2% to 8% of your portfolio), the current price is less relevant – you are buying for portfolio construction, not for price prediction. If you are buying gold because prices have risen sharply and you fear missing out, that is speculation rather than allocation. The rational approach: determine your target gold allocation, compare it to your current holding, and make up the difference systematically over 6-12 months rather than all at once. This reduces the risk of buying at an immediate peak while still building the desired allocation.

Are Sovereign Gold Bonds better than Gold ETFs?

For most long-term investors, yes. SGBs offer 2.5% annual interest (Gold ETFs offer zero yield), and redemption at maturity is completely tax-free. Gold ETFs are more liquid (can be sold any day on exchange), while SGBs have an 8-year term with early exit only on exchange at market prices. For investors with a long horizon who want tax efficiency, SGBs win. For investors who may need liquidity within 8 years or who want to rebalance frequently, Gold ETFs provide more flexibility. Since RBI reduced new SGB issuances from 2024 onwards, existing SGBs trade on exchanges at a small premium or discount to NAV.

Should I count inherited jewellery as part of my gold allocation?

Yes, but with a caveat. Jewellery you will not sell under normal circumstances – wedding sets, family heirlooms – should be counted but discounted. A practical approach: include 50-60% of the market value of jewellery you consider illiquid in your gold allocation calculation. Jewellery you would realistically consider selling or that is simply accumulated purchases (chains, coins) can be counted at full market value. This prevents double-counting in your allocation while acknowledging the real economic value of physical gold holdings.

Gold in a retirement portfolio is like a seatbelt in a car. You do not wear it because you plan to crash. You wear it because you cannot predict when or whether you will crash. The value becomes apparent only when you need it. The investor who builds a systematic gold allocation and forgets about it during bull markets is the one who benefits when markets fall.

Buy gold for the right reasons. Then hold it patiently.

Want a retirement portfolio with a thoughtfully constructed asset allocation?

RetireWise builds retirement plans where every asset – equity, debt, and gold – has a defined role and appropriate weight for your specific timeline and goals.

See Our Retirement Planning Service

💬 Your Turn

What percentage of your investment portfolio is currently in gold (including jewellery)? Do you think about gold as cultural obligation or as a financial asset? Share in the comments.

Portfolio Rebalancing: When and How to Rebalance Your Investment Portfolio

Hemant Beniwal
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1
Portfolio Rebalancing: When and How to Rebalance Your Investment Portfolio

“The investor’s main problem, and even his worst enemy, is likely to be himself.” – Benjamin Graham

A client called me in November 2020. Markets had recovered sharply after the March crash. His portfolio, which was 60% equity and 40% debt when we built it, had drifted to nearly 75% equity. He wanted to know whether to let it run.

This is the question that separates disciplined investors from lucky ones. The answer is almost always the same: your original asset allocation exists for a reason. When the portfolio drifts significantly from it, you restore it – regardless of what markets are doing, regardless of how good the momentum feels.

Research across multiple markets consistently shows that 90% of portfolio returns come from asset allocation – not stock selection, not market timing, not fund manager skill. The 10% that comes from those factors gets far more attention than it deserves. Rebalancing is how you protect the 90%.

⚡ Quick Answer

Portfolio rebalancing means restoring your original equity-debt allocation when it drifts beyond your threshold (typically 5-10 percentage points). Rebalance at least once a year under normal conditions, and also when life circumstances change – a new goal, a job change, approaching retirement. Rebalancing forces you to sell high and buy low systematically, which is the opposite of what most investors naturally do.

Portfolio rebalancing strategy for Indian investors

What Is Portfolio Rebalancing?

Rebalancing is the act of comparing your portfolio’s current asset allocation to your original intended allocation, and then buying or selling to restore the original mix.

Consider a simple example. You start with 60% equity and 40% debt. After a strong equity market year, your equity has grown to 70% of the portfolio. To rebalance, you sell equity (or redirect new investments into debt) until the allocation returns to 60-40.

Most advisors attach a threshold to this – typically 5%. So if your equity drifts to 65%, you hold. If it drifts to 67% or more, you rebalance. The threshold prevents unnecessary transaction costs and tax events from minor fluctuations while ensuring you act on meaningful drift.

“Rebalancing is uncomfortable by design. You are selling what has performed well and buying what has underperformed. That feels wrong. But that is exactly what it means to buy low and sell high – the most fundamental principle in investing, done systematically rather than through guesswork.”

– Hemant Beniwal, CFP, CTEP | Founder, RetireWise

When Should You Rebalance?

There is no single right answer, but here are the clear triggers.

Annual review. Under normal market conditions, review your allocation once a year. If it has drifted more than 5-10 percentage points from your target, rebalance. If it has not, leave it alone.

After major market moves. When markets fall sharply – as in March 2020 – your equity allocation may drop well below target. This is the rebalancing trigger most investors ignore, because buying equity during a crash feels terrifying. But that is precisely when rebalancing is most valuable: you are buying equity at lower prices.

When your life circumstances change. A new goal, a job change from salaried to freelance (irregular income requires more stability in the portfolio), a health event, a significant inheritance, or approaching retirement all warrant a portfolio review and possible rebalancing to a new target allocation.

When your risk capacity genuinely changes. Not your emotions – your actual capacity. A 55-year-old with 5 years to retirement genuinely has less capacity for a prolonged equity drawdown than they did at 45. That is a legitimate reason to rebalance toward a more conservative allocation.

When did you last review your portfolio’s actual asset allocation?

A RetireWise retirement plan includes an annual portfolio review and rebalancing schedule – so your allocation stays matched to your goals and risk capacity at every stage.

Book a Free 30-Min Call

How to Rebalance: Three Approaches

Constant-weight rebalancing. This is what most structured advisors use. Set a target allocation (e.g., 60% equity, 40% debt). Set a threshold (e.g., 5%). Whenever any asset class drifts beyond the threshold, restore the original allocation. Simple, systematic, and unemotional.

Strategic asset allocation with glide path. This approach maintains a long-term target allocation but adjusts it at defined life stages. A 35-year-old might hold 70% equity. By 50, this drops to 55%. By 60, it reaches 35-40%. This is especially important for retirement planning – the gradual shift protects the corpus as withdrawal date approaches.

Tactical adjustments within limits. Some investors take a more active view – increasing equity during corrections and reducing it near market peaks. This requires more attention and discipline, and the evidence on whether it adds value over simple constant-weight rebalancing is mixed. For most investors, constant-weight is better.

What to Watch When Rebalancing

Tax implications matter. In India, equity fund gains held over one year are taxed at 12.5% (LTCG above Rs 1.25 lakh threshold). Short-term gains are taxed at 20%. Selling recently purchased equity to rebalance can create unnecessary tax events. Where possible, use new inflows for rebalancing rather than redemptions – direct new SIPs toward the underweight asset class instead of selling the overweight one.

Exit loads matter. Many equity funds have 1% exit loads for redemptions within one year. If you are rebalancing within a year of purchase, factor this in.

Rebalancing through new investments is the most tax-efficient approach. If your equity has grown above target, pause the equity SIP and direct the same amount to a debt fund for a few months until the allocation normalises. This avoids redemption entirely.

Read – Investment Vehicles and Gears: Matching Your Investments to Your Goals

Read – Beta in Mutual Funds: What It Means for Your Retirement Portfolio

Frequently Asked Questions

If markets are falling, should I rebalance into equity even though it feels risky?

Yes – this is exactly what rebalancing requires, and it is why most investors find it difficult. When equity falls sharply, your allocation to equity drops below target. Rebalancing means buying more equity at lower prices to restore the target. This is the mechanical implementation of “buy low” – done not because you are predicting a recovery, but because your plan calls for a specific allocation. Over long periods, investors who rebalanced through corrections consistently outperformed those who did not. The discomfort is the mechanism working correctly.

How much does it cost to rebalance? Is it worth it?

The costs are exit loads (typically 0-1%), tax on gains, and brokerage (negligible for mutual funds). These can be minimised by rebalancing through new flows rather than redemptions wherever possible. The benefit – maintaining your intended risk level and systematically buying low/selling high – typically outweighs the cost. Studies of Indian and global portfolios consistently show that rebalanced portfolios outperform unmanaged portfolios over 10-20 year periods, even after transaction costs.

How do I calculate my current asset allocation?

List every investment by current value: equity mutual funds, direct stocks, PPF (treat as debt), FDs, debt mutual funds, gold, real estate (exclude primary residence). Add up the equity total and debt total separately. Divide each by the grand total to get percentages. Many investors are surprised by this exercise – they believe they are moderately allocated but discover they are heavily equity-concentrated or, more commonly for Indian investors, heavily debt-concentrated with inadequate equity exposure for their retirement timeline.

Rebalancing is not exciting. It does not involve market calls, stock picks, or special insight. It is a disciplined, scheduled maintenance activity – like changing the oil in your car. The investors who do it consistently, without emotion, are the ones whose portfolios arrive at retirement looking the way they were supposed to look when they were built 20 years earlier.

Build the plan. Stick to the allocation. Rebalance when it drifts. That is it.

Want a retirement plan with a built-in rebalancing schedule?

RetireWise builds retirement plans with defined target allocations and annual review triggers – so your portfolio stays on track without you having to make market calls.

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💬 Your Turn

When did you last rebalance your portfolio? What was the trigger – a market move, an annual review, or a life change? Share in the comments.

Fear and Greed: The Two Emotions That Destroy More Portfolios Than Any Market Crash

Hemant Beniwal
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Fear and Greed: The Two Emotions That Destroy More Portfolios Than Any Market Crash

In March 2020, the Nifty 50 fell 38% in five weeks. I watched two types of clients respond in completely different ways.

The first group called me in a panic. They had watched their portfolios drop Rs.30, Rs.50, Rs.80 lakh on paper. They wanted to exit. “Hemant, the market might go to zero. What if it doesn’t recover?” Fear had taken over. For many of them, I barely managed to hold the line.

The second group called with a different question: “Should I add more?” They had seen the crash as an opportunity. They continued their SIPs. A few added lump sums. By August 2020, they had recovered fully. By 2021, they had compounded the gains significantly.

Same market. Same crash. Very different outcomes – determined entirely by which emotion governed the decision.

Quick Answer: Fear and Greed in Investing

Fear causes investors to exit at market bottoms and lock in permanent losses. Greed causes investors to concentrate in overvalued assets at market peaks and ignore risk. Both emotions are triggered by the same mechanism: comparing what your portfolio did recently to what you hoped it would do. The antidote is not willpower – it is a written financial plan with specific goals, timelines, and an asset allocation that you commit to in advance before the market tests you.

How fear destroys portfolios

Fear in investing has one primary expression: selling at the wrong time. It feels rational in the moment. The logic sounds reasonable – “cut losses before they get worse,” “wait for clarity before re-entering,” “this time is different.” But the outcome is almost always the same: the investor exits near the bottom, misses the recovery, and re-enters much higher.

DALBAR’s research across multiple decades shows that equity investors consistently earn 3 to 5% less annually than the indices they invest in. The gap is not explained by fund selection. It is explained by behaviour – specifically, by the pattern of exiting during downturns and entering during rallies.

In the Indian context, this pattern has played out identically in 2001 (dot-com aftermath), 2008 (global financial crisis), 2011 (eurozone crisis), 2015 (China slowdown), 2018 (IL&FS and NBFC crisis), 2020 (COVID crash), and 2024 (small/midcap correction). Each time, investors who sold during the correction and waited for “clarity” missed the bulk of the recovery.

The reason fear is so powerful: losses feel psychologically twice as painful as equivalent gains feel pleasurable. This is not a character flaw – it is hardwired into human cognition, documented extensively by Daniel Kahneman and Amos Tversky. A Rs.5 lakh paper loss causes more emotional pain than a Rs.5 lakh gain causes pleasure. Knowing this does not neutralise it. But having a written plan helps you act against it.

How greed destroys portfolios

Greed is subtler and more dangerous than fear because it feels like wisdom in the moment. When small-cap funds returned 60% in 2023-24, buying them felt like an obvious decision. When crypto was doubling every few months in 2021, investing felt rational. When IT stocks were the only things rising in 2020-21, concentration felt like conviction.

Greed manifests as: chasing last year’s best-performing fund, concentrating in a single sector that has recently outperformed, adding money in lump sums at market peaks, abandoning a diversified portfolio for “better opportunities,” and ignoring valuation because “this time is different.”

Every market cycle has its version of this. In 2007 it was real estate and infrastructure funds. In 2017 it was mid-caps. In 2021 it was crypto and US tech. In 2023-24 it was small-caps and defence/PSU stocks. The narrative changes every time. The outcome – mean reversion after the frenzy – does not.

The most expensive version of greed is abandoning a SIP during corrections (fear) and then making large lump-sum investments when the market has already recovered significantly (greed). This is the pattern that produces the DALBAR gap.

Your emotions are predictable. Your plan should be designed for them.

Fear and greed do not disappear with knowledge. They are managed with structure – a written asset allocation, automatic SIPs, and a review process that focuses on goal progress rather than market movements. This is what we build with clients at RetireWise.

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The fear-greed cycle – and where you are in it

John Templeton described it: “Bull markets are born on pessimism, grown on scepticism, matured on optimism, and die on euphoria.”

At the pessimism stage – when headlines are uniformly negative, when friends are saying the market will fall further, when SIP cancellations are spiking – this is typically where the best long-term returns begin for investors who stay in or add more.

At the euphoria stage – when your auto driver is giving stock tips, when every conversation is about how much money is being made, when valuations have stretched beyond historical norms – this is typically when risk is highest, even though it feels lowest.

You cannot precisely time either stage. But recognising which stage you are in helps calibrate whether you are being pulled by fear or greed – and whether your instinct to act is coming from the right place.

The practical defence: write it down before the market tests you

The only reliable defence against fear and greed is a written investment policy: your asset allocation, your rebalancing rules, your SIP amounts, and your goal timelines. This document becomes your anchor when the market creates noise.

When markets fall 30% and fear wants you to sell, the written plan asks: “Has my retirement goal timeline changed? No. Has my income situation changed? No. Then why am I changing the plan?” Usually the answer is: no good reason. The plan holds.

When a sector has returned 80% in one year and greed wants you to concentrate, the written plan asks: “Does this fit my asset allocation? Is this size within my target for this type of investment?” Usually the answer is: no, it would require over-concentrating. The plan holds.

Also read: Loss Aversion: How Your Brain Is Wired to Lose Money in Markets

Frequently asked questions

Why do most investors earn less than the market?

The primary reason is behavioural: investors exit during downturns (fear) and re-enter after recoveries (greed). This pattern – selling low and buying high – creates the gap between market returns and investor returns. DALBAR’s research shows this gap averages 3 to 5% annually over long periods. It is not explained by fund selection or market timing skill but by the pattern of emotionally-driven decisions during extreme market conditions.

How do I stop making fear-driven investment decisions?

The most effective defence is structural, not motivational. Automate your SIPs so they continue without a monthly decision. Write down your asset allocation and rebalancing rules before the next market correction – not during it. Map each investment to a specific goal with a specific timeline, so a market fall in your equity portfolio feels different when you know it is for a goal 15 years away versus 2 years away. When you feel the urge to make a portfolio change, ask: “Has my situation changed, or has the market changed?” Market changes alone are rarely a good reason to change a well-structured plan.

Is it ever right to act on fear in investing?

Yes – but only when the fear is about your situation, not the market. If you discover your equity allocation is much higher than your actual risk capacity, reducing it during a calm period (not a crash) is sensible. If your goal timeline has shortened significantly and you have equity money needed within 2 years, shifting to debt is right. These are situation-driven decisions. What is almost never right: exiting a diversified equity portfolio during a correction because markets fell, without any change to your personal situation or timeline.

Which emotion has cost you more over your investing life – fear or greed? Share in the comments. Most investors have a dominant pattern, and naming it is the first step to managing it.

Health Insurance Planning: What COVID Taught Us About Getting Covered

Hemant Beniwal
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Health Insurance Planning: What COVID Taught Us About Getting Covered

“An ounce of prevention is worth a pound of cure.” – Benjamin Franklin

In August 2020, I received more calls about health insurance than in any previous year of my practice. Clients who had ignored their health cover for years were suddenly asking urgent questions. Some had inadequate coverage – family floaters with Rs 3-5 lakh sum insured that would barely cover a week in a private hospital with a serious illness. Others had none at all.

The COVID-19 pandemic did something that no amount of financial planning advice had managed: it made health insurance a felt need rather than an abstract obligation. People who had spent years deferring the decision to “next year” suddenly understood viscerally why comprehensive health cover is not optional.

The COVID-specific insurance products – Corona Kavach and Corona Rakshak – were short-tenure policies introduced by IRDAI in 2020 to provide emergency coverage during the pandemic. Both schemes have since been discontinued as COVID management improved and regular health insurance policies began covering COVID-related hospitalisation as standard.

What remains relevant is the underlying lesson: waiting until you need health insurance to buy it is the most expensive mistake in personal finance.

⚡ Quick Answer

Every Indian family needs comprehensive health insurance – not a disease-specific plan, not a corporate group cover as the only policy, and not an insufficient Rs 3-5 lakh family floater. A family of four in a Tier 1 city should have a minimum of Rs 15-20 lakh in individual or family floater health cover, with a top-up or super top-up layer for catastrophic expenses. The best time to buy is when you are young and healthy. The premium is lowest, pre-existing conditions have not developed yet, and the waiting period for exclusions begins immediately.

Health insurance planning guide for Indian executives and families

Why Most Indian Health Insurance Cover Is Inadequate

Three coverage problems are common in client portfolios.

Relying solely on employer group cover. Corporate health insurance is a valuable benefit but it is not sufficient as your only health cover. It covers you only while employed – a job change, layoff, or early retirement creates a gap. The coverage limit is typically Rs 3-5 lakh, which is inadequate for a serious hospitalisation in a private hospital in any major city. And family members are often inadequately covered or excluded.

Insufficient sum insured. A Rs 5 lakh family floater for a family of four in Delhi or Mumbai in 2025 is genuinely inadequate. A single major surgery – cardiac bypass, joint replacement, cancer treatment – can easily cost Rs 8-15 lakh. A week in an ICU at a private tertiary care hospital can exceed Rs 3-5 lakh. The sum insured set 10 years ago needs revisiting – medical inflation in India runs at 10-15% annually, significantly above general CPI.

Disease-specific plans substituting for comprehensive cover. Critical illness riders, cancer-specific plans, and similar products serve a purpose but should sit on top of comprehensive health insurance, not replace it. They pay a lump sum on diagnosis of a defined condition – but they do not cover the full range of conditions that result in hospitalisation.

“The COVID pandemic created genuine awareness around health insurance, but many families then bought minimum-compliant plans and moved on. What they needed was not a Rs 5 lakh COVID plan – it was a properly sized comprehensive health cover that would protect them from the full range of medical emergencies, not just one.”

– Hemant Beniwal, CFP, CTEP | Founder, RetireWise

How Much Health Cover Do You Actually Need?

A commonly used framework: your health insurance cover should be approximately 50% of your annual income, with a minimum floor of Rs 10 lakh per adult in Tier 1/2 cities. For a family of four in a major city, Rs 20-25 lakh in family floater cover – or individual policies of Rs 10-15 lakh each – is a reasonable starting point.

This seems expensive until you price a significant medical event. A coronary bypass surgery in a reputed private hospital in Delhi or Mumbai costs Rs 4-8 lakh. Cancer treatment can run Rs 10-30 lakh or more depending on the cancer type and treatment protocol. A road accident requiring multiple surgeries, ICU time, and rehabilitation can easily exceed Rs 15 lakh.

The solution to high premium on a large sum insured: use a base plan with a lower sum insured (Rs 5-10 lakh) combined with a super top-up plan that kicks in above the base. Super top-up plans offer very high coverage (Rs 20-50 lakh additional) at a fraction of the premium of a comparable base plan. The base plan handles routine hospitalisations; the top-up handles catastrophic events.

Is your health insurance cover adequate for your family?

A RetireWise retirement plan includes a complete insurance review – ensuring your health, life, and disability cover is right for your family’s needs before we build the investment strategy.

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Key Features to Evaluate When Choosing a Health Plan

Claim settlement ratio. IRDAI publishes annual claim settlement ratios for all health insurers. Choose companies with ratios consistently above 90%. A plan that is difficult to claim on defeats its purpose.

Network hospital coverage. Cashless hospitalisation is only available at network hospitals. Verify that the top private hospitals in your city are on the insurer’s network before buying. A policy with poor network coverage means reimbursement claims, which add stress and delay during a medical crisis.

Pre-existing disease waiting period. Most health plans exclude pre-existing conditions for a 2-4 year waiting period after policy issuance. Buy early, before these conditions develop. Once you have diabetes, hypertension, or other chronic conditions, the waiting period exclusion becomes a significant coverage gap that is difficult to close.

No-claim bonus. Most plans offer sum insured enhancement for each claim-free year. Over 5-10 years of no claims, this meaningfully increases your cover without corresponding premium increases.

Restore/recharge benefit. Some plans restore the sum insured if it is fully exhausted within a policy year – useful for families where multiple members might need hospitalisation in the same year.

What COVID Taught Us About Health Insurance Planning

The pandemic’s most lasting financial lesson was not about which specific insurance product to buy. It was about timing and comprehensiveness. People who had bought comprehensive health insurance when they were healthy, young, and before pre-existing conditions developed were protected. Those who had deferred or under-insured faced the worst of two options: either paying large out-of-pocket amounts during the crisis, or attempting to buy insurance mid-pandemic when insurers had tightened underwriting standards and introduced higher premiums and exclusions.

The decision window for comprehensive health insurance at the best terms is now, while you are healthy. Every year of deferral increases the probability of a pre-existing condition developing – which either makes coverage more expensive or adds a waiting period exclusion.

Read – How to Select the Right Health Insurance Cover

Read – How Much Health Insurance Do I Need?

Frequently Asked Questions

Should I keep my employer group health cover or buy individual cover?

Both. Never rely solely on employer cover for the reasons above – employment changes create coverage gaps at the worst possible times. Buy your own individual or family floater policy now and keep it continuously renewed regardless of employment status. Treat employer cover as a welcome supplement that reduces your out-of-pocket exposure but not as your primary protection.

At what age is it still reasonable to buy new health insurance?

Most health insurers issue new policies up to age 65 and some up to 75, but premiums increase substantially with age and underwriting scrutiny rises. More importantly, if you have developed diabetes, hypertension, heart disease, or other chronic conditions, these will carry waiting period exclusions or may result in policy loading (higher premium) or outright exclusion from the policy. The practical answer: buy before 40, ideally before 35, to get the best rates and widest coverage. After 50, it becomes increasingly difficult and expensive to get genuinely comprehensive cover.

Is it worth buying a top-up or super top-up over my existing cover?

Almost always yes. A Rs 50 lakh super top-up with a Rs 10 lakh deductible for a family of four typically costs Rs 8,000-15,000 annually – a fraction of what a base plan with Rs 50 lakh sum insured would cost. If your existing base plan (corporate or individual) provides Rs 5-10 lakh coverage, a super top-up above that threshold protects you from catastrophic medical events at very reasonable cost. It is the most cost-efficient way to significantly increase your health cover.

The COVID-19 period made health insurance visible in a way that routine advice never had. The lesson was not new – advisors have been saying “buy comprehensive health insurance early” for decades. The pandemic simply made the consequences of ignoring that advice impossible to overlook. Do not wait for the next medical emergency to take your health cover seriously.

Comprehensive health cover. Adequate sum insured. Started early. These three things.

Want a complete insurance and retirement plan review?

RetireWise reviews your health, life, and disability insurance as part of every retirement plan – ensuring the foundation is solid before building the investment strategy on top.

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💬 Your Turn

Has the COVID pandemic changed how you think about health insurance? Have you reviewed your cover since 2020? Share what you found in the comments.

7 Things We All Hate About Mutual Funds (2026 Update – Honest Edition)

Hemant Beniwal
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7 Things We All Hate About Mutual Funds (2026 Update – Honest Edition)

“No amount of sophistication is going to allay the fact that all your knowledge is about the past and all your decisions are about the future.” – Howard Marks

Mutual funds are a genuinely good investment vehicle. Diversification, professional management, liquidity, regulated structure – the advantages are real and meaningful for most Indian investors.

But they are not perfect. And the things that frustrate investors most about mutual funds are worth understanding honestly, because that understanding helps you use them better.

Here are seven things that genuinely irritate investors – and the honest context behind each one.

⚡ Quick Answer

The seven things investors most dislike about mutual funds are: unpredictable returns, lock-in clauses, fees and expenses, inefficient or inconsistent fund management, taxation (which changed significantly in Budget 2023 and 2024), lack of control over specific investments, and the overwhelming number of schemes. Most of these are features of the structure, not flaws – but knowing them helps you make better decisions about when and how to use mutual funds.

7 things investors dislike about mutual funds India 2026

First, the Real Advantages

Before the complaints, credit where it is due. Mutual funds democratised investing in India. They allow a person with Rs 500 per month to own a diversified portfolio of 50 stocks across sectors and market caps – something that would require Rs 5-10 lakh to replicate directly in the stock market. They are managed by professionals with research teams and data access that an individual investor cannot match. They are regulated by SEBI, which means disclosure norms, NAV transparency, and investor protection mechanisms are in place.

The complaints below are real. But they exist within a structure that has genuinely served Indian investors well over the last three decades.

1. Returns Are Unpredictable

Mutual fund returns depend on market conditions, interest rates, economic cycles, and fund manager decisions. They do not offer guaranteed returns. They cannot mirror past performance continuously. This frustrates investors who expect their SIP to grow at 12% every year because that was the 10-year historical average.

The honest framing: no serious wealth-building instrument offers predictable short-term returns. FDs offer predictability at the cost of inflation erosion. Equity mutual funds offer the possibility of real returns at the cost of short-term volatility. The frustration about unpredictability is often actually frustration about volatility – which is different from risk, and which is the price of long-term returns.

As Howard Marks observed, the sophistication of your analysis cannot change the fact that markets are forward-looking. The fund that returned 18% last year is not committing to 18% this year. When the fund underperforms this year, investors who chose it based on last year’s returns are doubly disappointed – frustrated both at the lower return and at their own decision-making process.

2. Lock-in Clauses

ELSS funds have a 3-year lock-in. Close-ended funds have lock-ins of 3-7 years. Some fund-of-funds structures have restrictions. Investors who need liquidity during the lock-in period face exit loads or cannot exit at all.

The honest framing: the lock-in in ELSS is the mechanism that produces the Section 80C tax benefit. It is not an arbitrary restriction – it is the condition attached to the deduction. Most open-ended equity and debt funds have no lock-in at all. Exit loads typically apply only in the first 1-3 years and are designed to discourage short-term trading behaviour, not to trap investors.

3. Fees and Expenses

Active equity mutual funds charge a Total Expense Ratio (TER) of approximately 1.5-2% per annum for regular plans. Index funds and ETFs charge 0.1-0.3%. On a Rs 50 lakh portfolio, the difference between a 1.8% TER and a 0.2% TER is Rs 80,000 per year in fees – every year.

This is a legitimate concern. SEBI has progressively capped TERs and mandated disclosure of expense ratios. The rise of index funds and ETFs in India gives investors a genuine low-cost alternative. The fee debate in India is no longer academic – index funds from major AMCs are now available at extremely low costs, and the evidence on whether active funds systematically outperform after fees is, at best, mixed.

4. Inconsistent Fund Management

Fund manager changes are more common than investors realise. A fund with a strong 5-year track record may have a different manager today than the one who built that record. Window dressing – buying outperforming stocks just before the quarterly disclosure date and selling them after – is a real phenomenon. Over-trading within the fund increases transaction costs that are borne by investors.

The honest framing: this is a real risk that deserves more attention than it typically receives. When evaluating a fund, check not just the returns but how long the current fund manager has been running the fund. A 10-year track record with a fund manager who joined 18 months ago is largely irrelevant to future performance.

5. Taxation – Updated for Budget 2024

Mutual fund taxation changed significantly in Budget 2023 and again in Budget 2024. The current position as of April 2026:

Equity mutual funds: Short-term capital gains (held less than 1 year) are taxed at 20% – increased from 15% in Budget 2024. Long-term capital gains above Rs 1.25 lakh per year are taxed at 12.5% – the exemption limit was raised from Rs 1 lakh and the rate from 10% in Budget 2024. Securities Transaction Tax of 0.001% applies on redemption of equity funds.

Debt mutual funds: From April 1, 2023, all gains from debt funds – regardless of holding period – are taxed at the investor’s slab rate. The earlier benefit of 20% LTCG with indexation after 3 years is no longer available. This makes debt funds considerably less attractive for investors in the 30% tax bracket compared to the pre-2023 position.

Dividend income: Dividends from mutual funds are added to income and taxed at slab rate. The earlier Dividend Distribution Tax (DDT) paid by the fund before distribution has been abolished. For investors in higher tax brackets, the growth option is almost always more tax-efficient than the dividend option.

The Portfolio Overlap Problem Nobody Talks About

A common problem I see: an investor holds 6-8 large-cap and flexi-cap funds from different fund houses. When I run an overlap analysis, 65-75% of the holdings are identical – Infosys, HDFC Bank, Reliance, TCS, appearing in nearly every fund. The investor believes they are diversified because they hold 8 funds. In reality they have one concentrated large-cap portfolio with 8 different expense lines and 8 different sets of paperwork. True diversification is across asset classes and market caps, not across fund houses holding the same stocks.

For most investors, 5-6 well-chosen funds across distinct categories – a diversified equity fund, a mid/small-cap allocation, a short-duration debt fund, and a liquid fund for the emergency bucket – provides better real diversification than 15 funds with overlapping holdings.

6. No Control Over Specific Investments

A mutual fund investor cannot decide which specific stocks or bonds to hold, in what proportion, or when to buy or sell individual securities. The fund manager decides. If you are ethically opposed to tobacco, defence, or a specific company and that company is in the fund, you have no recourse within the fund structure.

The honest framing: this is the cost of delegation. You are paying a fund manager to make these decisions. The alternative – direct equity investing – gives you control but requires the time, expertise, and discipline to make those decisions well. SEBI data consistently shows that the majority of individual direct equity investors underperform the market after accounting for trading costs and behavioural mistakes. For most investors, less control over specific securities is actually a feature, not a flaw.

7. Too Many Schemes

There are approximately 44 mutual fund companies in India offering around 2,500 schemes. The AMFI classification exercise of 2018 was supposed to rationalise this. It helped at the margin. The problem of choice overload – too many options producing decision paralysis or poor selection – persists.

The honest framing: the complexity is real but manageable with a clear framework. SEBI’s fund categorisation (large-cap, mid-cap, flexi-cap, value, ELSS, etc.) means that you only need to compare funds within a category, not across all 2,500 schemes. A well-structured financial plan specifies which category is needed for which goal, which reduces the choice to a small shortlist rather than a sea of options.

Read: How Healthy Is Your Mutual Fund Portfolio?

The complaints about mutual funds are real. But they are manageable with the right approach.

RetireWise builds retirement portfolios using mutual funds where they fit the goal – and alternatives where they don’t. The instrument should serve the plan, not the other way around.

See How RetireWise Structures Investment Portfolios

The investor who understands the limitations of mutual funds – and uses them anyway for the goals they serve well – is better positioned than either the investor who avoids them entirely or the one who uses them blindly.

Know the tool. Use it well. And know when something else serves better.

Which of these seven frustrations has affected your investment decisions the most?

A structured review of your mutual fund portfolio can identify whether you are getting the diversification, tax efficiency, and goal alignment you are paying for.

Book a Free 30-Min Call

Your Turn

Which of the seven is your biggest frustration? And has any of them caused you to make a decision you later regretted – exiting a fund, switching too often, or avoiding mutual funds entirely? Share in the comments.

Why People Avoid Financial Planning — And the Real Reason They Never Say Out Loud

Hemant Beniwal
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Why is it that the same person who spends three hours researching a laptop purchase cannot find 30 minutes to review their insurance cover?

It is not laziness. It is not ignorance. Something else is going on — and understanding it is the first step to fixing it.

⚡ Quick Answer

People avoid financial planning not because they are irresponsible — but because it forces them to confront uncomfortable truths about their current situation, their past decisions, and their uncertain future. The six reasons listed here are real. But the one reason underneath all of them is the same: fear.

Top 6 Undeniable Reasons People Hate Financial Planning

Why Most Indians Never Build a Financial Plan

I have had thousands of conversations with prospects over 25 years. Engineers. Doctors. Senior executives earning Rs 3-5 lakh a month. Well-educated, intelligent, financially aware people.

Almost every one of them had some version of a financial plan in their head. None of them had it on paper. And the gap between the two — the gap between “I know I should” and “I actually have” — is the most expensive gap in personal finance.

Here are the six reasons I hear most often. And the uncomfortable truth hiding behind each one.

Reason 1: “Financial Planning is Boring”

Let’s be honest. Reviewing insurance policies, calculating retirement corpus, updating nominees — none of this competes with a good Netflix series or a cricket match.

But here is what I tell clients: you spend more time researching the best restaurant for a family dinner than you spend reviewing your term insurance cover. You will spend 3 hours comparing mobile phone specs but have not checked if your health insurance sum insured is adequate for a single hospital stay in a metro city today.

The boredom is real. But it is selective. We choose boredom when the topic makes us uncomfortable. Financial planning makes us uncomfortable because it forces us to see our current situation clearly — and most of us are not proud of what we would see.

Why people avoid financial planning

Reason 2: Distrust of Financial Advisors

This one is legitimate. The Indian financial services industry has a long and well-documented history of mis-selling — insurance products disguised as investments, mutual funds recommended based on commission, ULIPs pushed as retirement plans. The distrust is earned.

But the solution is not to avoid financial planning. The solution is to find the right advisor. A SEBI-registered fee-only financial planner has no incentive to sell you products — they charge a flat fee for advice, nothing else. Their income does not depend on which mutual fund or insurance product you buy. That is a very different kind of advisor from the one who calls you every March to help you “save tax.”

The best financial planner I know treats every client like a family member. The worst ones I have seen treated clients like a transaction. Learn to tell the difference. Read more on why you should hire a financial planner.

Unsure where to start with financial planning?

A 30-minute clarity call costs nothing. A decade without a plan costs everything.

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Reason 3: Overwhelmed by Goal-Setting

“I want to retire at 55. I want to fund my daughter’s education abroad. I want to buy a second home. And I want to travel every year.”

All valid goals. All pulling in different directions. The moment you sit down to put numbers to them — timeline, corpus required, monthly saving needed — it can feel paralysing. The numbers are often frightening. And rather than face a frightening number, most people put the whole exercise away.

This is avoidance dressed up as overwhelm. The solution is not to make the exercise less complex. It is to break it into one step at a time. Start with a single goal. Calculate what it requires. Then add the next. Setting SMART financial goals is not glamorous. But it is the only way to go from wishes to plans.

Reason 4: “It is Too Complicated”

It can be. Tax rules change every budget. SEBI categories have multiplied. Insurance products have become more complex. For someone who has not followed finance closely, the learning curve feels steep.

But here is the truth: you do not need to understand everything to get started. You need to understand enough to make a few good decisions and find someone you trust for the rest. The biggest financial mistakes I have seen were not made by people who knew too little. They were made by people who thought they knew enough — and did it alone.

Complexity is not a reason to avoid planning. It is a reason to get help. Financial planning does not have to be complicated when done with the right guidance.

6 Undeniable Reasons People Hate Financial Planning

Reason 5: “I Don’t Have Time”

Anaya is a 38-year-old VP at a tech firm. She manages a team of 25. She reviews quarterly budgets, handles client escalations, and still finds time for her children’s school activities. She is not lazy. She is genuinely busy.

But financial planning — unlike a project deadline or a school pickup — does not shout when it is being ignored. It suffers silently. There is no immediate consequence for missing a review. No one calls. No alarm rings. The cost is invisible until it is not.

The real issue is not time. It is priority. We make time for what feels urgent. Financial planning rarely feels urgent — until it does. And by then, options narrow.

Two hours a year with a good financial planner can change your trajectory for the next 20 years. That is not a time problem. That is a priority problem.

Reason 6: “I Don’t Know Enough”

“I do not know where to start.” “What if I make a mistake?” “I will figure it out later.”

This is the most honest reason of all. And it is also the most solvable. Not knowing enough is not a permanent condition — it is a temporary gap. Reading, asking questions, and working with a trusted advisor closes it faster than you think.

The worst thing you can do with a knowledge gap is let it become a paralysis gap. You do not need to know everything before you start. You need to know enough to take the first step. The rest comes from doing.

The Real Reason — The One Nobody Says

Underneath all six of these reasons is one common thread: fear.

Fear of seeing how far behind you are. Fear of making a mistake. Fear that the numbers will not add up. Fear that the plan will show you something uncomfortable about your choices.

I have been doing this for 25 years. The clients who finally sit down and build a real plan almost always say the same thing afterward: “I am so relieved. I thought it would be worse than it is.” Sometimes the numbers are hard. But having a clear picture — even a difficult one — is always better than the fog of avoidance.

Frequently Asked Questions

Why do people procrastinate on financial planning even when they know it is important?

Procrastination in financial planning is driven by what psychologists call present bias — our tendency to overweight immediate discomfort (confronting hard numbers, feeling behind) over future benefit (financial security). The more uncomfortable the current financial picture, the stronger the avoidance. Starting with one small step — a single goal calculation — breaks this pattern better than trying to do everything at once.

How do I start financial planning if I find it overwhelming?

Start with just one question: what is my single most important financial goal in the next five years? Put a number and a date on it. Then calculate how much you need to save monthly to reach it. That is your first step. You do not need a complete plan to begin — you need a beginning that leads to a plan.

Is it too late to start financial planning at 45 or 50?

No. In 25 years of practice, I have never met someone for whom starting was a mistake — regardless of age. A 48-year-old with 12 years to retirement still has meaningful time to build, protect, and structure their finances. The bigger mistake is letting another 3-5 years pass because it feels too late to start.

How do I find a trustworthy financial advisor in India?

Look for a SEBI-registered Investment Adviser (RIA) who charges a flat fee for advice and earns no commissions from products. SEBI’s RIA registration number should be publicly displayed. A fee-only advisor’s income is not linked to what you buy — which eliminates the conflict of interest that drives most mis-selling in India.

You will spend the next 30 years managing the consequences of financial decisions made today. Whether you plan them or not, those consequences are coming. The only question is whether they will be consequences you chose — or consequences that chose you.

Do the Right Thing. Then Sit Tight.

💬 Your Turn

Which of these six reasons resonates most with you? Or is there a seventh reason — one that is not on this list — that has kept you from building a proper financial plan? Share it in the comments.

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