60-80% equities, 20% debt, 10% gold: Expert shares ideal long-term ETF portfolio for 2040
Pratik Oswal outlines a strategic approach for young investors aiming for long-term wealth through ETFs. He recommends a diversified portfolio with a mix of domestic and international equities, debt, and gold to balance growth and stability over a 15–20 year horizon.
- Sep 23, 2025,
- Updated Sep 23, 2025 9:52 PM IST
Pratik Oswal, Fintech strategist and Head of Passive Funds at Motilal Oswal AMC, believes passive investing is the future of wealth creation in India. Drawing inspiration from The Psychology of Money by Morgan Housel, he emphasizes that financial freedom is achieved not just through active income but primarily through smart investing. According to him, owning assets—equities, gold, or real estate—is what separates the financially free from others, with equities offering the highest long-term returns.
For investors seeking simplicity, index funds and ETFs are ideal. “Mutual funds simplify equity investing, and index funds simplify mutual funds,” Oswal explains. Passive investing allows investors to participate in market growth without the stress of stock-picking or timing the market. The two key drivers of long-term returns, he adds, are proper asset allocation and investor behavior, rather than selecting specific funds.
When building a long-term ETF portfolio, Oswal recommends a diversified approach. For a young investor with a 15-20 year horizon, 60-80% of the portfolio could be in equities, split between domestic and international markets, 20% in debt, and 10% in gold. Within equities, he suggests a mix of large-cap, mid-cap, and small-cap ETFs to balance growth and stability. International ETFs offer diversification, while debt and gold cushion the downside during market volatility.
Choosing the right ETFs requires attention to simplicity, cost, and liquidity. While index funds are easier for retail investors—allowing SIPs and end-of-day pricing—ETFs trade like stocks and require checking live prices against the INAV to avoid paying extra through impact costs. Low tracking error and high liquidity are key indicators of a well-managed ETF. Oswal also stresses avoiding overcomplication; a portfolio of five to six well-chosen ETFs is sufficient for most investors, as too many funds dilute returns and create unnecessary complexity.
Oswal cautions against relying on NFOs (new fund offers) unless they introduce truly unique products. Similarly, active investing often leads to poor outcomes due to emotional decision-making. Investors frequently panic in bear markets or overinvest in bull runs, eroding potential gains. A disciplined, long-term approach is far more effective.
For him, broad-based indices are the cornerstone of passive investing. The Nifty 500 ETF, for instance, mirrors the philosophy of buying the market, not betting on specific sectors or managers. It offers exposure across large, mid, and small caps, providing balanced growth while minimizing the risk of concentrated bets. “If India grows, this fund grows. There’s no reason to sell,” Oswal notes, highlighting the resilience of such broad-based investments.
Finally, he encourages investors to control emotions, maintain patience, and stay focused on their long-term financial goals. By combining a simple, diversified ETF portfolio with disciplined behavior, investors can build significant wealth by 2040, positioning themselves for financial freedom without the stress of active trading.
Pratik Oswal, Fintech strategist and Head of Passive Funds at Motilal Oswal AMC, believes passive investing is the future of wealth creation in India. Drawing inspiration from The Psychology of Money by Morgan Housel, he emphasizes that financial freedom is achieved not just through active income but primarily through smart investing. According to him, owning assets—equities, gold, or real estate—is what separates the financially free from others, with equities offering the highest long-term returns.
For investors seeking simplicity, index funds and ETFs are ideal. “Mutual funds simplify equity investing, and index funds simplify mutual funds,” Oswal explains. Passive investing allows investors to participate in market growth without the stress of stock-picking or timing the market. The two key drivers of long-term returns, he adds, are proper asset allocation and investor behavior, rather than selecting specific funds.
When building a long-term ETF portfolio, Oswal recommends a diversified approach. For a young investor with a 15-20 year horizon, 60-80% of the portfolio could be in equities, split between domestic and international markets, 20% in debt, and 10% in gold. Within equities, he suggests a mix of large-cap, mid-cap, and small-cap ETFs to balance growth and stability. International ETFs offer diversification, while debt and gold cushion the downside during market volatility.
Choosing the right ETFs requires attention to simplicity, cost, and liquidity. While index funds are easier for retail investors—allowing SIPs and end-of-day pricing—ETFs trade like stocks and require checking live prices against the INAV to avoid paying extra through impact costs. Low tracking error and high liquidity are key indicators of a well-managed ETF. Oswal also stresses avoiding overcomplication; a portfolio of five to six well-chosen ETFs is sufficient for most investors, as too many funds dilute returns and create unnecessary complexity.
Oswal cautions against relying on NFOs (new fund offers) unless they introduce truly unique products. Similarly, active investing often leads to poor outcomes due to emotional decision-making. Investors frequently panic in bear markets or overinvest in bull runs, eroding potential gains. A disciplined, long-term approach is far more effective.
For him, broad-based indices are the cornerstone of passive investing. The Nifty 500 ETF, for instance, mirrors the philosophy of buying the market, not betting on specific sectors or managers. It offers exposure across large, mid, and small caps, providing balanced growth while minimizing the risk of concentrated bets. “If India grows, this fund grows. There’s no reason to sell,” Oswal notes, highlighting the resilience of such broad-based investments.
Finally, he encourages investors to control emotions, maintain patience, and stay focused on their long-term financial goals. By combining a simple, diversified ETF portfolio with disciplined behavior, investors can build significant wealth by 2040, positioning themselves for financial freedom without the stress of active trading.