Rebalancing mutual fund portfolios is important to keep your investments in line with your financial goals and risk tolerance. Over time, the value of different funds can change, making your portfolio uneven. Rebalancing means adjusting the allocation by selling some funds and buying others to restore the original balance. This helps reduce risk and improve returns by maintaining the right mix of assets.
What is Mutual Fund Portfolio Rebalancing?
Mutual fund portfolio rebalancing is the process of realigning the percentage of each mutual fund in your portfolio. This means selling some shares of funds that have grown and buying shares of funds that have fallen to keep the portfolio balanced. It ensures your investment mix stays consistent with your goals and risk level.
Why Should You Rebalance Mutual Fund Portfolios?
Rebalancing helps avoid taking too much risk if one fund grows too big in your portfolio. It also helps you lock in profits and invest in undervalued funds. Without rebalancing, your portfolio can become unbalanced, which may lead to unwanted risks and poor returns. Regular rebalancing keeps your investments aligned with your plan.
How Often Should You Rebalance Mutual Funds?
It is best to rebalance mutual fund portfolios once or twice a year. You can also rebalance when your allocation shifts by 5% or more. This helps keep your portfolio risk and returns balanced without frequent trading.
Does Rebalancing Mutual Funds Improve Returns?
Rebalancing may not always increase short-term returns but helps in reducing risks. It encourages disciplined investing by buying low and selling high. Over time, this can lead to more consistent and safer portfolio growth.
How Can Indian Investors Rebalance Mutual Funds?
Indian investors can use online platforms like Angel One to track and rebalance their mutual fund portfolios. It is important to check your portfolio regularly and adjust based on your goals and market changes. Keep in mind taxes and transaction fees when rebalancing to avoid extra costs. Simple, regular reviews help keep your investments healthy.
Contact Angel One Support at 7748000080 or 7771000860 for mutual fund investments, demat account opening, or trading queries.
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