Your portfolio should match your risk tolerance.

Not your return expectations. If you cannot handle a 20–30% fall in your portfolio, putting most of your money into smallcaps and sector stocks can make it difficult to stay invested. Conservative investors can focus more on FDs, bonds and debt funds, with limited equity exposure. Moderate investors can combine equity, debt and gold. Those comfortable with bigger swings may allocate more to equities, including midcaps and smallcaps, while keeping some money in safer assets. Aggressive investors can explore global equities and limited thematic bets, but these can also lead to sharp losses. Before deciding your allocation, consider your income stability, emergency fund, investment horizon and financial goals. A portfolio is useful only if you can hold it through a market fall without being forced to sell. Choose an allocation you can live with during a bad year, not just a good one.