Rebalancing of portfolio: What is it and why is this important?
If you are reading this, you must be already aware that the financial markets are indeed volatile and dynamic. This means he invested ₹6 lakh in equity funds, ₹3 lakh in debt and the remaining ₹one lakh in the gold bonds. Let us suppose that the stock markets happen to spike in the next two years, pushing them higher by 40 percent whereas the debt funds grow at a predetermined rate of 6 percent per annum, and the gold remains the same two years later. Equity ₹ 8,40,000 Debt ₹ 3,36,000 Gold ₹ 1,00,000 Total ₹ 12,76,000 Ideally, this ratio should continue to be 60:30:10 instead of 66:26:8. Ideal proportion of assets Equity ₹ 7,65,600 Debt ₹ 3,82,800 Gold ₹ 1,27,600 Total ₹ 12,76,000 The assets should be in the ratio of ₹7,65,600: 3,82,800: 1,27,600 in order for them to remain in the ratio of 6:3:1.
Portfolio Rebalancing: What are the most effective strategies for managing risk?
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