Why is It Important to Rebalance Your Portfolio?

It is essential to evaluate your asset allocation and rebalance your portfolio for establishing an effective risk control mechanism. Also, your portfolio should not be totally dependent on your investment’s success or failure. On a timely basis, you need to review your investment portfolio and move under-performing assets to other asset classes with better prospects. As an investor, it’s important to regularly rebalance your portfolio as per the market conditions to bring down your losses and manage risk.

Despite the second COVID-19 wave, BSE Sensex has reached new highs by increasing to almost 16% in the last six months. Several firms have ended up paying hefty dividends, and investors are now thinking about what could be the next level. 

As an investor, if you panic when the market declines, you need to consider asset allocation, which is conservative in nature, irrespective of your age. Your portfolio needs to be rebalanced to comply with the altering financial goals and needs with changing circumstances. A solid example of this is that you plan your finances for a single child, but a well-thought financial plan might not suffice your financial needs if you end up having twins.

Often, circumstances make your goals redundant and compel you to either create new plans or revisit your existing plan.

Markets are dynamic in nature; your investment’s performance is influenced by various social, political, economic, and other macroeconomic factors. Hence, monitoring your portfolio’s performance regularly and rebalancing the same is highly important.

For any clarifications/feedback on the topic, please contact the writer at bhavana.pn@cleartax.in

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