The closer an investment goal gets, the less room there is for a market shock—and that is where a glide path comes in.
A glide path is a plan for changing how money is invested as a target date approaches. Instead of holding a fixed mix of assets, the portfolio starts out tilted towards growth and gradually shifts towards stability. In investing, that typically means a high share of equity in the early years, when there is time to ride out volatility, followed by a gradual move into debt as the goal nears and the room for error shrinks.
The shift is predetermined and follows a schedule, rather than a hunch about where markets are headed.
This takes the rebalancing decision out of the investor’s hands. The move from equity to debt happens with time, whether markets are rising or falling. That matters because investors often struggle to make these decisions themselves: they may stay invested in equity longer than their goal allows or make emotional calls when markets turn. A fixed, time-based glide path is designed to reduce the scope for such behavioural mistakes.
The Securities and Exchange Board of India (Sebi) has introduced a life cycle funds category built around this glide path idea. ICICI and Zerodha Mutual Fund have already launched funds under the category, with more fund houses expected to follow.
How the glide path shifts
Equity allocation can range from 65–95% when the fund is more than 15 years from maturity, ease to 50–65% at five to 10 years out, then to 35–50% at three to five years, and finally fall to 5–20% in the last year before maturity. Debt moves in the opposite direction, rising to as much as 25–65% near the end.
Gold, silver and related instruments can account for up to 10% throughout. This exposure is taken through units of gold and silver exchange-traded funds (ETFs). The funds can also invest in exchange-traded commodity derivatives and units of infrastructure investment trusts.
“Globally, glide path-based strategies are widely used. It can help investors manage their portfolio without the need to time their equity investments in terms of trimming the exposure,” said Vishal Dhawan, founder of Plan Ahead Wealth Advisors.
“Such glide-path based investments can help investors who want a no-nonsense, zero maintenance portfolio,” said Ravi Saraogi, co-founder of Samasthiti Advisors.
Before investing, however, it is worth looking at how a fund builds its portfolio within these bands. Check the split across large-, mid- and small-caps and whether it fits your own risk appetite. The allocation bands are also wide, so the scheme document matters: see where within the band the fund intends to operate and whether that matches how much risk you are comfortable taking.