State of the 1 Portfolio — Returns, Allocation & Rebalancing (July 2026)

📖 The Global Indian Investor

Learn how to build a globally diversified portfolio from India. 7 of 12 chapters are live, covering LRS, FX, global indexes, and Irish ETFs.

June 2026 was a month of leadership rotation. US equities and Gold cooled off while Indian equities recovered. Despite these market movements, this monthly portfolio update shows the portfolio drift

• reduced from 2.86% to 1.97% due to market movements and
• further reduced to 1.60% using only fresh monthly investments—without selling any holdings.

I am publishing two portfolio reports:

The 1 Portfolio represents the core long-term wealth portfolio, excluding the Emergency and Travel funds.

1 Portfolio — Snapshot

Although portfolio XIRR declined from 21.67% to 20.34%, the reduction was primarily driven by the cooling of previous outperformers (US equities and Gold) aided by currency appreciation. The portfolio itself became better diversified and closer to its target allocation.

1 Portfolio — Performance & Drift

Following is the current state of the 1 Portfolio as on July 1, 2026 before monthly investment.
Data is compared to the previous State of the 1 Portfolio (June 2026) report.

Definitions

• Asset Class: Underlying asset class within the 1 Portfolio.
• XIRR: Annualized return generated by investments in the asset class.
• Growth Share: Percentage of total portfolio gains contributed by the asset class.
• Current Allocation: Current percentage of portfolio market value allocated to the asset class.
• Target Allocation: Desired long-term allocation for the asset class.
• Drift: Difference between current allocation and target allocation (positive = overweight, negative = underweight).
• Total Drift: Calculated as the sum of positive deviations from target allocations. A higher drift indicates the portfolio is further away from its target allocation. Conceptually, it represents the percentage of the portfolio that would need to be sold and reallocated to reach the target allocation precisely (ignoring taxes, transaction costs, and other practical constraints).

{
  "title": [
    { "text": "1 Portfolio Performance", "left": "center", "top": 0, "textStyle": { "color": "#2c3e50", "fontSize": 16, "fontWeight": 600 } },
    { "text": "Market Value", "left": "center", "top": "37%", "textStyle": { "fontSize": 15, "fontWeight": 600, "color": "#444" } },
    { "text": "Growth Share", "left": "center", "top": "57%", "textStyle": { "fontSize": 15, "fontWeight": 600, "color": "#444" } }
  ],
  "tooltip": { "trigger": "item" },
  "color": ["#2563EB", "#F97316", "#F59E0B", "#10B981", "#047857", "#64748B", "#D4AF37"],
  "legend": {
    "bottom": 0, "left": "center", "orient": "horizontal",
    "data": ["Nasdaq 100", "Nifty 50", "Next 50", "Midcap 150", "Smallcap 250", "Debt", "Gold"]
  },
  "series": [
    {
      "name": "Growth Contribution",
      "type": "pie",
      "radius": ["36%", "58%"],
      "center": ["50%", "52%"],
      "startAngle": 180,
      "clockwise": false,
      "label": { "show": true, "position": "outside", "formatter": "{b} ({c}%)" },
      "data": [
        { "name": "Nasdaq 100", "value": 61.39 },
        { "name": "Nifty 50", "value": 4.88 },
        { "name": "Next 50", "value": 3.53 },
        { "name": "Midcap 150", "value": 3.35 },
        { "name": "Smallcap 250", "value": 2.68 },
        { "name": "Debt", "value": 3.81 },
        { "name": "Gold", "value": 20.35 },
        { "name": "__placeholder__", "value": 99.99, "itemStyle": { "color": "transparent" }, "label": { "show": false }, "tooltip": { "show": false }, "labelLine": { "show": false } }
      ]
    },
    {
      "name": "Market Value Allocation",
      "type": "pie",
      "radius": ["36%", "58%"],
      "center": ["50%", "48%"],
      "startAngle": 180,
      "clockwise": true,
      "label": { "show": true, "position": "outside", "formatter": "{b} ({c}%)" },
      "data": [
        { "name": "Nasdaq 100", "value": 39.22 },
        { "name": "Nifty 50", "value": 19.91 },
        { "name": "Next 50", "value": 9.50 },
        { "name": "Midcap 150", "value": 9.51 },
        { "name": "Smallcap 250", "value": 4.89 },
        { "name": "Debt", "value": 6.13 },
        { "name": "Gold", "value": 10.84 },
        { "name": "__placeholder__", "value": 100.00, "itemStyle": { "color": "transparent" }, "label": { "show": false }, "tooltip": { "show": false }, "labelLine": { "show": false } }
      ]
    }
  ],
"toolbox": {
  "show": true,
  "feature": {
    "saveAsImage": {
      "title": "Download Chart",
      "show": true
    }
  }
}
}

{
  "title": { "text": "1 Portfolio Drift", "left": "center", "top": 0, "textStyle": { "color": "#2c3e50", "fontSize": 16, "fontWeight": 600 } },
  "tooltip": { "trigger": "axis", "axisPointer": { "type": "shadow" } },
  "grid": { "left": "15%", "right": "15%", "bottom": "10%", "top": "16%", "containLabel": true },
  "xAxis": { "type": "value", "name": "Drift %", "nameLocation": "middle", "nameGap": 30 },
  "yAxis": { "type": "category", "data": ["Gold", "Debt", "Smallcap 250", "Midcap 150", "Next 50", "Nifty 50", "Nasdaq 100"] },
  "series": [
    {
      "name": "Drift",
      "type": "bar",
      "label": { "show": true, "formatter": "{c}%" },
      "data": [
        { "value": 0.84, "itemStyle": { "color": "#D4AF37" }, "label": { "position": "left" } },
        { "value": 1.13, "itemStyle": { "color": "#64748B" }, "label": { "position": "left" } },
        { "value": -0.11, "itemStyle": { "color": "#047857" }, "label": { "position": "right" } },
        { "value": -0.49, "itemStyle": { "color": "#10B981" }, "label": { "position": "right" } },
        { "value": -0.50, "itemStyle": { "color": "#F59E0B" }, "label": { "position": "right" } },
        { "value": -0.09, "itemStyle": { "color": "#F97316" }, "label": { "position": "right" } },
        { "value": -0.78, "itemStyle": { "color": "#2563EB" }, "label": { "position": "right" } }
      ]
    }
  ],
"toolbox": {
  "show": true,
  "feature": {
    "saveAsImage": {
      "title": "Download Chart",
      "show": true
    }
  }
}
}

Performance & Drift Observations

• Concentrated Growth: The Nasdaq 100 remains the undisputed powerhouse, accounting for 61.39% of the total growth share (though slightly down from 63.61% in June). Its XIRR cooled down to 37.49% (from 40.07%). In terms of drift, it shifted from a slight overweight (+0.07%) to an underweight position (-0.78%).
• Domestic Lag & Improvement:
  • The Nifty 50 is still the primary laggard but showed MoM improvement. Its XIRR increased from 2.14% to 3.72%. More importantly, its drift increased from -0.89% to -0.09%—a favorable move since an increase in drift is good for underweight assets, moving them closer to target.
  • Collectively, all four Indian equity indices contributed just 14.44% of the total growth share, despite commanding a combined allocation of 43.81%.
  • Next 50, Midcap 150, and Smallcap 250 show higher XIRR because of recent hard rebalancing, and all of them saw a slight MoM uptick in XIRR.
• Gold Cooling Down: Gold’s performance cooled, with XIRR dropping to 34.40% (▼ 7.41% from 41.81% in June). However, its drift favorably decreased from a heavy +1.87% down to +0.84%—a positive outcome for an overweight asset returning towards its target.
• Debt Drift Rising: Debt now carries the largest positive drift in the portfolio at +1.13%, an increase from +0.92% last month. Since Debt is already overweight, this drift increase is unfavorable for maintaining the target allocation and flags it as a priority for future correction.

In a global multi asset portfolio, performance leadership rotates continuously. The objective is not to predict the next winner, but to systematically rebalance capital toward undervalued assets.

Drift Correction aka Monthly Investment

The table below consolidates the current state, monthly investment allocation, post investment state and shows how drift is managed:

A new allocation of 2.22% resulted in a drift correction of 0.37% (from 1.97% to 1.60%).

Definitions

• Asset Class: Underlying asset class part of the 1 Portfolio
• Current: Current portfolio allocation before new investment
• Pre Drift: Current deviation from target (sum of positive values = total drift)
• New Invest: Percentage of next monthly investment directed to each asset class
• Post Invest: Estimated allocation after the investment
• Post Drift: Estimated drift after investment
• Target: Target allocation for the asset class
• Total Drift: Drift is calculated as the sum of positive deviations from target allocations

{
    "height": "700px",
    "title": { "text": "Drift Correction aka Monthly Investment", "left": "center" },
    "tooltip": { "trigger": "axis", "axisPointer": { "type": "shadow" } },
    "legend": { 
        "data": ["Pre Drift", "Post Drift", "Improvement", "Improvement (Evaporated)", "Worsening", "New Water Level"],
        "bottom": 0 
    },
    "toolbox": {
        "show": true,
        "feature": {
            "saveAsImage": {
                "title": "Download Chart",
                "show": true
            }
        }
    },
    "grid": { "left": "3%", "right": "4%", "bottom": "15%", "containLabel": true },
    "xAxis": {
        "type": "category",
        "data": ["Nasdaq 100", "Nifty 50", "Next 50", "Midcap 150", "Smallcap 250", "Debt", "Gold"],
        "axisLabel": { "interval": 0, "rotate": 30 }
    },
    "yAxis": {
        "type": "value",
        "name": "Drift (%)",
        "min": -1.0,
        "max": 1.25,
        "axisLabel": { "formatter": "{value}%" }
    },
    "series": [
        { "name": "Pre Drift", "type": "bar", "data": [], "itemStyle": { "color": "#3b82f6" } },
        { "name": "Post Drift", "type": "bar", "data": [], "itemStyle": { "color": "#1e40af" } },
        { "name": "Improvement", "type": "bar", "data": [], "itemStyle": { "color": "#22c55e" } },
        { "name": "Improvement (Evaporated)", "type": "bar", "data": [], "itemStyle": { "color": "#22c55e", "opacity": 0.4, "decal": { "symbol": "rect", "color": "rgba(0,0,0,0.2)", "dashArrayX": [1, 0], "dashArrayY": [2, 4], "rotation": 0.785 } } },
        { "name": "Worsening", "type": "bar", "data": [], "itemStyle": { "color": "#ef4444", "opacity": 0.4, "decal": { "symbol": "rect", "color": "rgba(0,0,0,0.2)", "dashArrayX": [1, 0], "dashArrayY": [2, 4], "rotation": 0.785 } } },
        {
            "name": "New Water Level",
            "type": "line",
            "data": [],
            "itemStyle": { "color": "#1e40af" },
            "lineStyle": { "type": "dashed", "color": "#1e40af", "width": 2 },
            "markLine": {
                "symbol": "none",
                "silent": true,
                "label": { "show": false },
                "lineStyle": { "type": "dashed", "color": "#1e40af", "width": 2 },
                "data": [
                    { "yAxis": -0.34 }
                ]
            }
        },
        {
            "name": "Empty",
            "type": "bar",
            "barWidth": "70%",
            "stack": "main",
            "data": [-0.34, -0.09, -0.35, -0.35, -0.11, 0, 0],
            "itemStyle": { "color": "transparent" },
            "tooltip": { "show": false }
        },
        {
            "name": "Neg Delta",
            "type": "bar",
            "barWidth": "70%",
            "stack": "main",
            "data": [
                { "value": -0.44, "itemStyle": { "color": "#22c55e" } },
                { "value": -0.25, "itemStyle": { "color": "#ef4444", "opacity": 0.4, "decal": { "symbol": "rect", "color": "rgba(0,0,0,0.2)", "dashArrayX": [1, 0], "dashArrayY": [2, 4], "rotation": 0.785 } } },
                { "value": -0.15, "itemStyle": { "color": "#22c55e" } },
                { "value": -0.14, "itemStyle": { "color": "#22c55e" } },
                { "value": -0.11, "itemStyle": { "color": "#ef4444", "opacity": 0.4, "decal": { "symbol": "rect", "color": "rgba(0,0,0,0.2)", "dashArrayX": [1, 0], "dashArrayY": [2, 4], "rotation": 0.785 } } },
                0, 0
            ],
            "tooltip": { "show": false }
        },
        {
            "name": "Neg Base",
            "type": "bar",
            "barWidth": "70%",
            "stack": "main",
            "data": [
                { "value": -0.22, "itemStyle": { "color": "#3b82f6" } },
                { "value": -0.66, "itemStyle": { "color": "#1e40af" } },
                { "value": -0.50, "itemStyle": { "color": "#3b82f6" } },
                { "value": -0.51, "itemStyle": { "color": "#3b82f6" } },
                { "value": -0.78, "itemStyle": { "color": "#1e40af" } },
                { "value": -1.00, "itemStyle": { "color": "#1e40af" } },
                { "value": -1.00, "itemStyle": { "color": "#1e40af" } }
            ],
            "tooltip": { "show": false }
        },
        {
            "name": "Pos Base",
            "type": "bar",
            "barWidth": "70%",
            "stack": "main",
            "data": [
                0, 0, 0, 0, 0, 
                { "value": 1.00, "itemStyle": { "color": "#1e40af" } },
                { "value": 0.60, "itemStyle": { "color": "#1e40af" } }
            ],
            "tooltip": { "show": false }
        },
        {
            "name": "Pos Delta",
            "type": "bar",
            "barWidth": "70%",
            "stack": "main",
            "data": [
                0, 0, 0, 0, 0,
                { "value": 0.13, "itemStyle": { "color": "#22c55e", "opacity": 0.4, "decal": { "symbol": "rect", "color": "rgba(0,0,0,0.2)", "dashArrayX": [1, 0], "dashArrayY": [2, 4], "rotation": 0.785 } } },
                { "value": 0.24, "itemStyle": { "color": "#22c55e", "opacity": 0.4, "decal": { "symbol": "rect", "color": "rgba(0,0,0,0.2)", "dashArrayX": [1, 0], "dashArrayY": [2, 4], "rotation": 0.785 } } }
            ],
            "tooltip": { "show": false }
        },
        {
            "name": "Pre Drift",
            "type": "line",
            "data": [-0.78, -0.09, -0.50, -0.49, -0.11, 1.13, 0.84],
            "itemStyle": { "color": "#3b82f6" },
            "lineStyle": { "opacity": 0 },
            "symbol": "none"
        },
        {
            "name": "Post Drift",
            "type": "line",
            "data": [-0.34, -0.34, -0.35, -0.35, -0.22, 1.00, 0.60],
            "itemStyle": { "color": "#1e40af" },
            "lineStyle": { "opacity": 0 },
            "symbol": "none"
        },
        {
            "name": "Improvement",
            "type": "line",
            "data": [0.44, "-", 0.15, 0.14, "-", 0.13, 0.24],
            "itemStyle": { "color": "#22c55e" },
            "lineStyle": { "opacity": 0 },
            "symbol": "none"
        },
        {
            "name": "Worsening",
            "type": "line",
            "data": ["-", -0.25, "-", "-", -0.11, "-", "-"],
            "itemStyle": { "color": "#ef4444" },
            "lineStyle": { "opacity": 0 },
            "symbol": "none"
        }
    ]
}

The new water level is computed using the Forward Water-Filling approach. Capital is distributed across underweight assets to raise their drift up to this new line.

• Moving towards 0 is improvement and moving away from 0 is worsening.
• Pre Drift = Post Drift + Improvement for Nasdaq 100, Next 50 and Midcap 150
• Pre Drift = Post Drift + Improvement(Evaporated) for Debt and Gold
• Pre Drift = Post Drift - Worsening for Nifty 50 and Smallcap 250

Key Observations from this month’s allocation

• Nasdaq 100 receives 59.01% of the next investment. With a -0.78% drift, it is currently the most underweight asset class and therefore becomes the primary destination for fresh capital.
• Selective Equity Allocation — The remaining investment is directed to Next 50 (16.34%), Midcap 150 (16.34%), and Nifty 50 (8.31%). Smallcap 250 receives no allocation, as it way above the new water level line. We need to let it cool down.
• Gold and Debt receive zero — both assets remain overweight. By directing no new funds to these asset classes, their allocation gradually declines toward the target as the equity portion of the portfolio grows.

Investment Stack

System Optimizations

IBKR Desktop App

I switched to use the IBKR desktop app instead of the web interface for placing orders and I found it much better than the web interface. I will continue using the desktop app for future transactions. It has options to select the exchanges directly, which I couldn’t find on the web. Though I didn’t change from SMART routing, I would like to try using it for future.

The Perpetual Rebalancing Framework

Finally I published The Perpetual Rebalancing Framework in detail. Following is the introduction from the article.

The Perpetual Rebalancing Framework is a liquidity-aware, drift-aware, tax-aware and stateful portfolio operating system designed to support both phases of an investor’s journey:

1. Accumulation: Building wealth through regular contributions.
2. Retirement: Funding expenses while preserving long-term portfolio stability.

The framework is built on 3 core principles:

1. Liquidity First: Maintain sufficient liquidity for emergencies during accumulation and for regular expenditures during retirement.

2. Risk Management:

   • Passive Drift Control: Use portfolio cash flows to continuously reduce portfolio drift month on month.
   • Active Drift Control: Perform tax-aware slow rebalancing only when overall portfolio drift exceeds predefined thresholds.

3. Tax Efficiency: Minimize taxes by preferentially realizing Long-Term Capital Gains (LTCG) while keeping portfolio turnover low.

Execution Friction

Salary Day != Investment Day

Last month i moved to Salary Day = Investment Day. I am investing on the same day I receive my salary.

Though the June salary landed on the last working day, I couldn’t execute the plan as it was after the cut off time for Indian Mutual Funds and Forex remittance. I had to wait a day and then planned the investments using the 30th June EoD data (instead of 29th June).

ICICI Money2World Website Outage

On 1st July I started executing the indian mutual funds 3 of 4 funds invested across me/spouse folios. I kept the 4th fund along with the forex remittance as a buffer. Essentially I want to do the forex remittance to the IBKR before buying the last mutual fund.

July 1

• Using BHIM I was able to create the Trade deal on FX Retail as required and money debited instantly via UPI
• ICICI Money2World website was down till 5:30pm on July 1st, so couldn’t do the forex remittance.
• Once the website was functioning, I executed the trade deal on the website.

July 2

• I kept getting multiple sms/emails/calls from the ICICI team asking me to utilize the deal, I told them that I did once the website was up and shared the reference id.
• 12:48 ICICI usually reverses the BHIM UPI debit, debits the full amount again, and finally I receive these SMSs.
• 13:24 Then I went and placed the buy order for the last Indian mutual fund.
• 15:45 I reached out to the ICICI Phone Banking number to raise this issue of pending execution. He said it will likely get executed next day. I specifically told him I am concerned on the recent outage blocking my execution. He said he will reach out to the concerned team.
• 16:36 I received the email on the transfer request completed. (…with the wrong SWIFT Copy PDF. It contained a manual LRS application form with another customer’s government ID and sensitive data.). I suspect someone manually triggered this after my call and attached wrong file.
• 17:11 Order completed in IBKR. Finally!

Unlike this documented transfer (which took ~90 minutes), this time it took almost 2 days. This was a large transfer so Bank of Baroda setup I could have got few dollars extra. Contemplating to use it if this issue is recurring.

Learning: Next time I have to check if the Money2World is up before creating the deal on FX Retail via BHIM. Otherwise I could use BoB setup.

Outcome

I want to complete all my investments on June 30. But, it was dragged on till July 2. Let’s see how the execution goes for the July 31 investment plan in the next report.

New Discovery

FX Retail/Bharat Connect Forex

I have been using BHIM to create FX Retail Trade deals and execute them via ICICI Money2World as documented here.

• I explored CRED for FX Retail/Bharat Connect Forex option
  • It has features to create the FX Retail Trade deal (Better interface compared to BHIM)
  • I didn’t create trade deal with it due to higher forex allocation for this month
  • They had Net Banking option which can overcome the UPI limits of ₹5 lakhs. We can do upto $10k with it
  • If this works well, I am unblocked upto $10k outwards remittance
  • Probably, will test/publish the article for lower volume in future
• Explored Mobikwik as well
  • This Forex option comes in search
  • But it is disabled for usage (When I touch the Forex icon on search result, nothing happens)

SIX Swiss Exchange vs. London Stock Exchange

The SIX Swiss Exchange (EBS) is currently more expensive than the London Stock Exchange (LSE) for my transactions. However, several low-TER Nasdaq 100 ETFs are available only in USD on SIX, while the LSE alternatives generally have higher expense ratios. For a long-term portfolio, the lower TER can offset the higher trading costs within a few years.

I will keep monitoring whether these ETFs are eventually listed on LSE in USD. While I could buy the EUR- or GBP-denominated listings on LSE/Xetra, that would add FX conversion costs, more tax-reporting overhead, and unnecessary EUR/GBP exposure.

For now, I prefer paying the higher one-time trading cost on SIX Swiss Exchange to hold lower-cost USD-denominated ETFs.

Reflections

What I need to improve

• Need to see if I can get lower brokerage cost by selecting the exchange option available in IBKR desktop

Expected Allocation Trends

• I will start allocating to gold much sooner than I anticipated
• Debt fund allocation will happen later than gold
• Zero Drift Portfolio appears increasingly achievable

Transparency Note

This portfolio reflects my personal investment strategy and risk tolerance. It is not investment advice.