The Tricolor Portfolio: Equity for growth, debt for stability, hybrid for balance

An impressive milestone that speaks volumes about investor intent was reached in June 2025 when the number of mutual fund folios in India surpassed 24 crores with Monthly Average Assets Under Management (AAUM) reaching close to 75 lakh crores. A growing number of people are selecting mutual funds in order to increase their wealth with greater structure, purpose, and foresight. However, in this rush to invest, it’s simple to forget about ‘balance,’ that is very crucial.

If you were to visualize your portfolio through the lens of the Indian flag, each color would stand for one of the three main pillars of investing: BALANCE, STABILITY and GROWTH. Similar to how a flag would be incomplete without any one stripe, your portfolio will flourish when debt, equity, and hybrid instruments all function together in harmony.

Much like equity, the topmost band, saffron, stands tall and assertive. Growth is the primary goal of equity investments. They capture the spirit of entrepreneurship in a rapidly expanding economy, the kind that motivates your portfolio to reach new heights. Long-term wealth creation can be achieved with equity, particularly if you stay invested throughout cycles. Like the color itself, though, it also represents bravery because staying the course is necessary in the volatile equity markets.

Next comes white, the space for clarity and peace, akin to debt. This segment brings stability. Debt investments offer relatively predictable returns, lower volatility and help cushion the impact when markets become jittery. Just as the white band in the flag provides contrast and balance, debt investments play a calming role in your portfolio, making sure your journey to wealth isn’t a rollercoaster. They ensure you’re not putting all your eggs in one basket and aid you to meet your short- and medium-term goals more confidently.

Green, on the other hand, is the color of balance, nurturing, and equilibrium. Consider ‘hybrid funds,’ which offer the best of both worlds by combining debt and equity. This category is ideal for those who want a more balanced risk-reward equation, especially if they’re new to market investing or want a smoother ride without giving up on growth. Hybrid funds offer a more flexible core for your tricolor portfolio by dynamically adapting to shifting investor objectives and market conditions.

Although it might create a statement, holding onto one color doesn’t convey the whole story. Diversification comes into play here. A ‘well-diversified portfolio’ builds resilience in addition to chasing returns. It ensures that your financial progress won’t be derailed by a single market event or economic shift or dependent on single asset class. More significantly, it enables your investments to prosper in all economic cycles, whether the economy is booming, slowing, or recovering.Of course, diversification isn’t just about owning many funds or spreading investments thin across categories. Intentionality is the key. For instance, ‘multi-asset allocation funds’ go one step further by combining not only debt and equity but also, occasionally, gold, silver or international exposure. The curation of these funds is based on the knowledge that different assets shine at different times. Combining them results in a portfolio that is responsive to changing market conditions and is well-balanced.The fundamental tenet of this strategy is that your financial objectives shouldn’t be solely borne by one asset class. Your portfolio should be based on more than just debt or equity, just as the economy, education, environment, and inclusion are the foundations of national progress. A tricolor approach helps you stay grounded while still pursuing growth by providing both launchpads and safety nets.The good news? You don’t need to be a financial expert to put this into practice. These days, mutual fund categories provide carefully crafted products that embody these values. Every type of investor, from the risk-averse to the aggressive, has options, whether it’s through ‘balanced advantage funds’ or ‘dynamic asset allocation funds’ that modify exposure based on market conditions, or straightforward hybrid funds that combine equity and debt.

The flag doesn’t wave just one color, and neither should your portfolio. Growth is important, but so are balance and stability. Let your investments demonstrate unity in diversity as we commemorate the spirit of independence. As Dr. A.P.J. Abdul Kalam said, “Dreams are not those which come while we are sleeping, but those which don’t let us sleep.” Similarly, a tricolor portfolio isn’t just a plan — it’s a vision of financial freedom in action!

(This autor is Head of Research & Fund Manager, Mirae Asset Investment Managers)

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)