VBA -The framework behind every allocation I make

Today I want to show you the system I use to decide when to buy, how much, and when to stop.

I call it the Valuation-Based Allocation (VBA) Framework.

Here's how it works.

The Nine Buckets

Every portfolio I build is constructed from nine distinct asset buckets:

1. India Large Cap Equity

2. India SMID Equity

3. S&P 500

4. Nasdaq 100

5. European Equity

6. Emerging Markets

7. China Equity

8. Brazil Equity

9. India Debt Funds

Each bucket has a structural confidence ceiling: a maximum allocation based on how well I understand that market and its risk profile. For example, India Large Cap has a 100% ceiling because I have deep structural familiarity. China Equity has a 20% ceiling because of governance and geopolitical risk.

The ceiling is not the target. It's the absolute maximum. Valuation determines how far below the ceiling the actual allocation sits.

The Five Valuation Zones

Every bucket gets assessed and assigned to one of five zones:

1. Dirt Cheap:  Aggressively add (maximum allocation, deploy to ceiling)

2. Undervalued: Add (active deployment, below fair value)

3. Fair: Continue/Moderate (hold existing, no fresh deployment)

4. Overvalued:  Slow/Pause (begin trimming if above 50% of ceiling)

5. Exuberant: Reduce/Rebalance Out (trim aggressively, route capital elsewhere)

The zone is determined by current valuation metrics; P/E ratios, dividend yields, historical averages. It is not a prediction of where I think the market is going.

The Flow Rule

Capital flows sequentially. If a bucket is unattractive, I move to the next bucket in the hierarchy:

India Large Cap → India SMID → S&P 500 → Nasdaq 100 → Europe → EM → China → Brazil → India Debt

If all equity segments are unattractive, capital routes to India Debt and waits. Every rupee always has a home.

Here's a specific example: how the framework worked in practice:

In Q1 2023, China Equity sat in my assessment as Undervalued (Hang Seng P/E: 10x vs 15-year median of 13x). My client portfolio had 0% China allocation at the time: well below the 20% structural ceiling.

The framework action: Add with conviction.

I started deploying. Notice I didn’t predict China would rally. I allocated because the framework told me: valuations are compressed, allocation is below ceiling, zone says add.

That allocation performed well. But more importantly, when China rallied and valuations normalized to Fair, the framework told me to stop adding. That discipline: buying lower, stopping when valuations normalize is what protects long-term compounding.

Here's the key insight:

Most investors buy more when prices rise (FOMO) and sell when prices fall (fear). 

Investing stalwart Warren Buffett says the contrary: "Be fearful when others are greedy, and greedy when others are fearful."

The VBA Framework incorporates this principle to find the right investment opportunities.

The VBA Framework does not tell me where markets will go. It tells me what to do with capital given where valuations are today.

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