A Risk Profile Has an Expiry Date

My friend has been putting money into his daughter's college fund since she was three years old. Ninety percent equity, the whole way. It was the right call. He had fifteen years of runway, so he rode every dip and let the thing compound.

She starts college in two years. He is still ninety percent equity. That is the part he had not thought about.

I asked him one question. What happens if the market falls thirty five percent the summer before her first tuition cheque.

Here is why that lands. A thirty five percent fall needs a fifty four percent climb just to get back to flat. At a normal equity return that is about four years. Two years from the goal, nobody has four years.

Run the numbers. Two savers, same fifty lakh, both two years out. A crash hits the final stretch. The one who stayed ninety percent equity lands at forty lakh, nearly ten lakh short of the seat. The one who had already glided down to twenty five percent equity lands at fifty two lakh, funded with room to spare. Same market. The only difference is the mix each carried into the last mile.

The honest catch. If the crash never comes, the cautious one gives up a few lakh of upside. That is the premium. Near the finish you are not paying for growth anymore, you are paying to make sure the goal actually gets funded.

A risk profile is not a dial you set once and forget. It has an expiry date. The equity you could ride at year one is not the equity you can afford at year fourteen. Glide it down on a schedule, not on a hunch.

Set the dial for where you actually are: