What are the factors to consider when rebalancing your portfolio? 4 experts weigh in
portfolio rebalancing. The main decision that you must look at when balancing your assets is your eventual goals and not shift the goal posts, too much.
“We have always maintained that the decision to rebalance one’s portfolio should be made keeping their goals in mind, not to try and time the market or book profits," said Harsh Gahlaut, CEO, FinEdge of rebalancing the various assets in your portfolio. One should continue to remain invested in the asset class that matches their goal tenor, with a systematic de-risking a couple of years prior.
If required, one can temporarily switch some of their long-term equity investments to a safer fund, but immediately restart an STP (systematic transfer plan) back into the same asset class without trying to time their entry back. Tax and load considerations should always be secondary decision factors when it comes to rebalancing decisions, as that can prove to be penny-wise/pound-foolish.
“In rebalancing, you need to trim (your investment in) the outperformers, and invest in the underperformers in the same weightage," says Abhishek Banerjee, Founder and CEO, Lotusdew Wealth & Investment Advisors. During your rebalancing of your portfolio, another aspect that you need to consider is risk – with reference to your risk appetite in your model portfolio. If the risk in a particular sector or stock exceeds your comfort zone then you need to get that risk in line with your model portfolio.
“When rebalancing your investment portfolio it is an important strategy to maintain the desired risk and return profile over time. The specific factors one should consider when rebalancing depend on investment goals, risk tolerance, and asset allocation," said Colonel Rakesh Goyal (retd) a Certified
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