How Much of Your Portfolio Should Be in Unlisted Shares?

# How Much of Your Portfolio Should Be in Unlisted Shares?

Once an investor decides unlisted shares might have a place, the next question is sizing: how much is sensible? There is no single correct percentage — anyone who quotes one as a hard rule is overreaching. What does exist is a way to *think* about the question. This article offers a framework around risk capacity, liquidity, and the core-satellite idea. The numbers used are illustrative, not prescriptive.

Disclaimer: This article is educational and not investment advice. It does not recommend any specific allocation or any specific share. Unlisted shares are illiquid and high-risk, including the risk of loss. Consult a SEBI-registered investment adviser for guidance suited to your finances.

Why There Is No Magic Number

Allocation depends on factors that differ from person to person:

• Risk capacity — how much loss your finances can absorb without derailing your goals
• Time horizon — how long you can leave money untouched
• Income stability — a steady salary supports more risk than uncertain income
• Existing portfolio — what else you already hold and how liquid it is
• Temperament — whether you can hold a falling, illiquid position calmly

Two people with the same net worth can sensibly land on very different allocations. So treat any percentage you read as a starting point for thought, not an instruction.

The Core-Satellite Way of Thinking

A useful structure is core and satellite:

• The core is the bulk of your portfolio — stable, diversified, and liquid. Think index funds, quality listed equity, and debt instruments you can access when needed.
• The satellite is a smaller portion for higher-risk, higher-conviction positions. Unlisted shares, if you choose them, belong here.

The point of this structure is that even if a satellite position disappoints badly, your core — and your financial stability — stays intact. The satellite adds potential upside without betting the house.

A reasonable mental test: if your entire unlisted allocation went to zero, would your financial plan still hold together? If the answer is no, the allocation is too large.

Risk Capacity Comes First

Before any percentage, settle the foundations:

• Emergency fund — several months of expenses, fully liquid, untouched by any risky asset
• Near-term goals — money for anything within a few years should not be in unlisted shares
• Debt — high-interest debt usually deserves priority over speculative investing
• Insurance — basic health and life cover in place

Only money beyond these foundations is a candidate for an illiquid, high-risk allocation. Unlisted shares are funded from genuine surplus, not from money with a job to do soon.

An Illustrative Way to Size It

Here is one *illustrative* way some investors reason about it — not a recommendation:

• Keep the majority of the portfolio in the liquid, diversified core.
• Cap all high-risk, illiquid bets — unlisted shares, niche thematic plays, and similar — at a small minority of the total.
• Within that, keep any single unlisted company smaller still, so no one name dominates.

The exact figures are yours to decide with an adviser. The principle is what travels: small, capped, and diversified within the risky slice.

Why Illiquidity Forces Smaller Sizing

With listed assets you can rebalance freely — trim a position that has grown too large or exit one that has soured. Unlisted shares do not offer that flexibility. You may be unable to sell for months or years.

That has two consequences for sizing:

• You cannot easily course-correct, so the initial decision carries more weight.
• The money is genuinely locked, so it must be money you will not miss.

The harder it is to exit, the smaller and more deliberate the position should be.

Concentration Is the Hidden Trap

The most common sizing mistake is not the headline percentage — it is concentration. Putting a large share of your risky allocation into a single unlisted company, often on the strength of one IPO rumour, exposes you to a single point of failure.

• Spread across more than one name if you invest at all
• Avoid letting excitement about one story drive an outsized bet
• Remember that you cannot quickly trim a position that has become too large

Revisit, But Accept the Constraint

Portfolios drift over time, and you should review your allocation periodically. But accept that with unlisted shares your ability to act on that review is limited — you may have to wait for a liquidity event to rebalance. This is one more reason to size conservatively at the outset rather than relying on future fixes.

Sizing Across Different Situations

The same principles produce different answers depending on circumstances. A few illustrative contrasts:

• Young investor, stable salary, long horizon. Has time to leave money locked away and to recover from a setback, so may reason toward a slightly larger satellite slice — still a minority of the portfolio, never the bulk of it.
• Investor nearing a big near-term goal. A house purchase or a child's education within a couple of years argues for little or no illiquid exposure, because the money simply cannot be tied up.
• Investor with uncertain or lumpy income. Less predictable cash flow lowers risk capacity, which usually means a smaller allocation and a larger liquid buffer.
• Investor already concentrated elsewhere. Someone heavily exposed to, say, their employer's equity should be wary of adding more illiquid, concentrated risk on top.

None of these are formulas — they are illustrations of how the same framework bends to fit a life, not the other way round.

A Balanced Bottom Line

There is no correct percentage for unlisted shares — only a sensible way to reason about it. Fund the allocation from genuine surplus, keep it a small capped satellite around a stable liquid core, diversify within the risky slice, and respect the illiquidity by sizing conservatively. The right number is the one that lets you sleep even if the position disappoints.

*Published by the Polemarch editorial team. Educational only — not investment advice. Allocations shown are illustrative; consult a SEBI-registered adviser.*