1.What is portfolio rebalancing?


  • Portfolio rebalancing is the continuous process of changing your portfolio asset allocation, to keep it in line with the originally planned portfolio asset allocation model, which is as per your risk profile.

2.How does it work?


  • Equity markets can go up or down every day, hence so do the stock prices Now, for example, let’s say that your financial planner has worked out an asset allocation plan for you which is 60% stocks, 30% bonds and 10% cash

  • When the equity markets move up, stocks will go up and in your plan the 60% allocation to stocks may go up to 65% or 70% or X% and hence the proportion of bonds in your portfolio may go down to 25% or 20% or Y% from your total portfolio of 100%. Conversely, when the equity markets move down, stocks will go down and in your plan the 60% allocation to stocks may go down to 55% or 50% or X% and hence the proportion of bonds in your portfolio may go down to 35% or 40% or Y% from your total portfolio of 100%

  • This has to be done 4 times a year for the long-term goal that you have in mind. (Example if your goal is 15 years away, then 4 times per year X 15 years = 60 times), hence your financial planner will rebalance your portfolio 60 times by either buying equity stocks or selling equity stocks. Hence, the final effect is that your portfolio will always be in line with your original asset allocation plan and you will be either booking profits (when markets go up) or you will be buying equity stocks (when markets go down) This constant process, if done in a disciplined manner, for 15 years, without interruption will help you finally achieve your financial goal. Ideally, you have to sit with your financial planner every quarter and review and rebalance your portfolio

3.Who will do this work as I am busy in my day job and have no spare time?


  • Your financial planner will do the portfolio rebalancing for you. He/She may charge you professional fees for doing the same and you should happy to pay an expert to do this work for you, while you are busy in your day job or business activity.

  • We at www.investmentz.com provide financial planning services to our customers. Please call us right NOW to make your financial plan

All the best for achieving goals!!

Prashant M.Mehta


Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.

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