Portfolio Rebalancing

I thoroughly enjoyed your previous issue on Muhurat picks for Samvat 2078. Can you shed some light on the significance of portfolio rebalancing, especially in volatile markets?
- Aditya Gupta

Editor Responds: Thank you for the kind words. We are delighted to know that you found our cover story in the last issue fascinating and helpful. Portfolio rebalancing is the process by which an investor restores their portfolio to its target allocation. The same is done by divesting in underperforming assets and investing in the ones that have the potential to outperform and flourish. As per research conducted by Vanguard, there is no optimal frequency or threshold for rebalancing. It is rather subjective and ultimately boils down to investor preference. As such, most portfolios are traditionally reviewed and rebalanced on an annual or semi-annual basis. However, consequential global or even domestic events may often necessitate reviewing and rebalancing a portfolio outside of the traditionally accepted timeframes. Hope this helps. Keep writing to us.