The 50/30/20 Rule for Long-Term Investing

longterminvesting2
Jun 5
2 min read

When building a long-term investment portfolio, it’s important to spread your money across different types of companies. The 50-30-20 rule is an easy way to do that.

It helps you balance your investments across:

Large-cap (stable) companies
Mid-cap (growing) companies
Small-cap (high potential) companies

This blog explains how the rule works and how you can use it to grow your wealth steadily over time.

What is the 50-30-20 Rule?

It’s a guideline for how to divide your investment in stocks:

50% in Large-Cap Stocks – Big, established companies
30% in Mid-Cap Stocks – Medium-sized, growing companies
20% in Small-Cap Stocks – Smaller companies with high growth potential

This mix gives you:

Stability from large companies
Growth from mid-sized businesses
Higher returns (with more risk) from small companies

How to Use This Rule

Step 1: Divide Your Investment

If you’re investing ₹1,00,000 or $10,000:

₹50,000 (50%) goes to large-cap stocks
₹30,000 (30%) to mid-cap stocks
₹20,000 (20%) to small-cap stocks

Step 2: Choose Stocks or ETFs

Here are examples of what you could invest in:

Large-Cap Examples

Apple, Microsoft, Reliance Industries
Index Funds: S&P 500, Nifty 50

Mid-Cap Examples

Cummins, Tata Power, Zoetis
Mid-Cap Funds or ETFs

Small-Cap Examples

IonQ, GreenPower, small IT or energy startups
Small-Cap Mutual Funds or ETFs

Step 3: Review Once a Year

Your investments will grow at different speeds. Once a year, check your portfolio and adjust if needed to keep the 50-30-20 balance.

Why This Rule Works

Large-caps give stability and steady returns
Mid-caps offer higher growth with moderate risk
Small-caps provide long-term upside, though they are more volatile

By combining all three, you create a portfolio that grows steadily while managing risk.

Final Thoughts

The 50-30-20 rule is an easy and effective way to invest for the long term. It keeps your portfolio balanced, diversified, and focused on growth.

It’s perfect for investors who want a mix of safety, opportunity, and long-term wealth creation—without overcomplicating things.

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