My friend, Durgesh, recently met me for coffee and during the course of the conversation, he began talking about his financial goals. He said that he had identified six financial goals.

  • Retirement at the end of 30 years 
  • Son’s higher education after 15 years 
  • Downpayment for house buying at the end of seven years
  • Buying a car at the end of two years
  • and an emergency fund to take care of contingencies.

That made me wonder. Should he maintain a single portfolio to achieve all the above goals or maintain a separate portfolio to chase each of them?

Unified portfolio construction takes all financial goals into consideration and arrives at a common asset allocation strategy. A single SIP to invest every month that will achieve all goals over a period of time. 
Separate portfolios in turn chase each goal separately and with a unique asset allocation based on the time horizon and investment needs of each goal.

Let’s first understand how a unified portfolio strategy works

For the sake of simplicity, let’s assume there are only two long-term goals to be achieved by Durgesh – his child’s higher education and his own retirement. 

1. For the child’s education, he needs Rs 50 lakh after 10 years

2. And a retirement kitty of Rs 5 crore after 25 years

Under goal-based financial planning, he would be asked to invest about Rs 21,000 as an SIP to hit the target kitty of Rs 50 lakh for his child’s education at the end of 10 years. He would need to invest Rs 26,000 via another SIP for the next 25 years to chase the retirement goal. 

In other words, invest Rs 47,000 (21,000+26,000) for the next 10 years and Rs 26,000 thereafter for another 15 years. 

Unified portfolio construction, in turn, looks at portfolio construction differently. 

It arrives at a unified asset allocation that grows to at least Rs 50 lakh at the end of 10 years and to Rs 5 cr at the end of 25 years. For this, a SIP of Rs 42,000 will suffice.

It will grow to Rs 98 lakh by the end of 10 years after which Rs 50 lakh will be withdrawn. The rest along with further SIP investments will ultimately grow to Rs 5 cr at the end of 25 years. For the sake of calculation, 100% equity investments have been assumed at an 11%-12% annualized return. Although you should go for 

While a unified portfolio is intuitively appealing and simplistic in its approach, maintaining separate portfolios has its set of advantages.

Which approach gives you more focus?

Once you separate your financial goals and articulate the financial target, you are motivated towards achieving it.

SIPs for each of your goals are known and you have a clear idea of your progress towards goals. In case of any shortfall, you could resort to a course correction. 

In a unified portfolio approach, there is the likelihood of achievement of one goal getting compromised in order to achieve another. This happens when one withdraws more from the portfolio to meet the shortfall. 

The effect of compounding

While the SIP amount is relatively lesser for a unified portfolio in the above example, total SIP investments are also more. To be precise, the overall investment is Rs 1.26 cr for a unified portfolio as against Rs 1.05 cr for goal-based over the 25-year period. 

Then there is some thing called sequence risk

In a goal-centric approach, goals are divided based on the investment horizon.

A growth-oriented portfolio is maintained for goals with a time horizon of seven years or more. Liquid or ultra-short term funds are preferred for goals with five years or lesser years. And as you approach your goal, you calibrate equity exposure to avoid sequence risk.

Sequence risk is the danger of timing of the withdrawals affecting the investor’s return. In a unified portfolio, there is the risk of not knowing if you are on course to achieve your critical goals. 

However, creating a unified portfolio also makes sense sometimes. Especially, if you have just started on your investment journey and don’t have much to invest. Also, it makes sense to merge similar debt-based goals.

For instance, Durgesh could club his car and emergency goals by maintaining a single debt portfolio that in turn will be invested in liquid or ultra-short-term funds. While investing in a fund, you can still do the portfolio segregation by maintaining different folios for different goals. 


Goal-centric financial planning can be more precise and effective in its approach than unified portfolio making. However, a unified portfolio can still make sense if you have fewer distinct goals or you are starting out on your investment journey.