Rebalancing your stock portfolio is important because it helps maintain your desired level of risk and keeps your investments aligned with your goals. Over time, some stocks may grow faster than others, changing your portfolio’s balance. Rebalancing means selling some of the high-performing stocks and buying others that are underweighted. This keeps your portfolio stable and avoids taking too much risk or missing opportunities.
What is Portfolio Rebalancing?
Portfolio rebalancing means adjusting the mix of stocks, bonds, and other assets in your portfolio to match your investment plan. It involves selling some assets that have grown too much and buying those that have fallen behind. This helps keep your investments diversified and balanced according to your risk tolerance.
Why is Rebalancing Important?
Rebalancing is important because it controls risk and avoids your portfolio becoming too risky or too safe. Without rebalancing, your portfolio might get heavily weighted in one stock or sector, increasing risk. It also helps lock in profits from high-performing stocks and invest in undervalued ones. This keeps your investment strategy on track.
How Often Should You Rebalance Your Portfolio?
It is good to rebalance your portfolio at least once or twice a year. You can also rebalance when your asset allocation changes by a set percentage, like 5% or 10%. Regular rebalancing helps keep your investments aligned with your goals and risk levels.
Does Rebalancing Improve Returns?
Rebalancing can improve returns by keeping your portfolio diversified and avoiding big losses from overexposure to one stock or sector. It helps buy low and sell high by shifting investments regularly. While it may not always boost short-term returns, it reduces risk and supports steady growth over time.
How Can Indian Investors Start Rebalancing?
Indian investors can start rebalancing by tracking their portfolio regularly and comparing it with their target asset allocation. Many online platforms and brokers, including Angel One, offer tools to help with rebalancing. Investors should consider taxes and transaction costs while rebalancing to avoid unnecessary expenses. Simple, regular adjustments can keep portfolios healthy and aligned with financial goals.
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