Simply Save | How portfolio re-balancing can help investors during extreme market phases?

Re-balancing of portfolio is another tool that investors can use to their advantage, especially when markets swing between extreme highs and lows. 

Simply put, you keep bringing your allocation between equity and debt, back to your original allocation when markets go through excesses, on higher or lower side.

So, if the market correction has reduced the share of equity investments in your portfolio, you add to it. Similarly, if market euphoria has increased the share of equity investment beyond your original allocations, you reduce it and increase debt exposure. This approach also ensures that investors are booking profits at regular intervals, and not just passively sticking to a hold-and-sit tight approach. 

While major events and its market impact can be the reasons to re-balance your portfolio, you can also choose to review your portfolio at regular intervals, quarterly, semi-annually or annually to decide whether re-balancing is needed. 

You can do the re-balancing with other asset classes like gold and international equities as well. If the share of either of the asset classes drop or rise above your original allocations, you can take steps to revert to original allocations.  

In today’s Simply Save Podcast, Amol Joshi, founder of Plan Rupee Investment Services talks with Moneycontrol’s Jash Kriplani on how investors can re-balance their portfolios to get most from their investments.