Why should you rebalance your portfolios using index funds?

The markets are bleeding, thus, prompting many to rejig their portfolios. While it may be okay to place bets on focused or thematic funds as active investments, you must include an index fund too for portfolio rebalancing through passive investments. These passive funds must be bought apart from the active funds to benefit from market-linked returns, low tracking error, diversification and transparency regarding the fund’s composition. Benefits of investing in passive funds Passive fund investments have their benefits including continued stable returns, thus, explaining the need to include them in your portfolio. Instead of investing directly in stocks, you may park money in the underlying indices like the Equity index fund like Nifty 100, Nifty Smallcap 50 or debt index fund like AAA Bond, you automatically gain access to some of the good stocks that help earn returns in the long run while lowering the inherent risk associated with a particular stock or sector.