Second, within each asset class, you must decide on sub-asset allocations. Building a robust portfolio also requires following the core and satellite portfolio approach.
Third, maintaining a robust portfolio requires periodic (at least an annual) review and rebalancing. Let us take a deeper dive into each of these steps.
When should you rebalance?
You should rebalance at least once every year.
You may rebalance on a particular date, such as your birthday, or the start of the calendar or financial year.
You may also rebalance when the allocation of a particular asset class has moved by, say, 5 percentage points.
For instance, if your allocation to equities is 60 per cent and it moves to 65 per cent, you may rebalance.
The final method is to use a mix of both the approaches: rebalance on a particular date every year but also rebalance if your asset allocation has moved by a certain number of percentage points.
Asset allocation
The appropriate asset allocation for an investor should depend on their risk appetite and risk-taking ability. While the two terms may appear very similar, there is a subtle difference between the two.
Risk appetite: This is essentially your psychological comfort with investment risks. Some investors remain unfazed by significant market downturns. They do not worry even if their portfolio dips by 3040 per cent. By contrast, others feel anxious after a 10 per cent decline.
Risk-taking ability: This aspect is influenced by factors such as the investor's age and potential future earnings. Typically, a younger individual with a long earning horizon possesses a higher risktaking capacity. If there is a market downturn and the portfolio takes a nosedive, youngsters have time on their side. They can wait until their portfolio recovers.
この記事は Investors India の June 2024 版に掲載されています。
7 日間の Magzter GOLD 無料トライアルを開始して、何千もの厳選されたプレミアム ストーリー、9,000 以上の雑誌や新聞にアクセスしてください。
すでに購読者です ? サインイン
この記事は Investors India の June 2024 版に掲載されています。
7 日間の Magzter GOLD 無料トライアルを開始して、何千もの厳選されたプレミアム ストーリー、9,000 以上の雑誌や新聞にアクセスしてください。
すでに購読者です? サインイン
Thematic Fund Or Sectoral Fund, Which Fund Suits You?
A thematic fund is a type of mutual fund that focuses on investing in companies based on specific themes or trends.
Be Kind To Your Kidneys
The kidney is a vital organ in our body which is four inches long and two and a half inches in width.
Have You Included A Passive Fund In Your Portfolio Yet?
The assets under management (AUM) of passive funds recently crossed the Rs. 10 lakh mark. While a significant portion of this money comes from institutional investors, such as the Employees Provident Fund Organisation (EPFO), these funds are also gaining popularity among retail investors.
Mutual Fund
1. SEBI allows mutual funds to buy and sell credit default swaps (CDS)
Insurance News
1. The finance minister has launched a new NPS scheme named NPS Vatsalya
ASK THE EXPERT
Dear Sir, I attended your webinar on post-retirement financial planning. As advised by your good self, I invested in NPS after retirement.
Market Mystery: Some Important Investing Lessons from Fund Managers Themselves
Mr. Mahesh Patil is the Chief Investment Officer (CIO) of Aditya Birla Sun Life AMC Limited. As the CIO Mahesh oversees INR 3 lakh crore of assets under management.
How to make a cautious entry into equity funds during a bull market
The number of mutual fund folios has been rising, with flows via the systematic investment plan (SIP) route reaching new highs.
All that you need to know to kickstart your retirement planning process
We all enjoy planning for the future. It’s a good idea to plan ahead of time for anything, from the day’s activities to a vacation.
5 Steps To Achieve Your Financial Goals
From a beach house, a Jaguar, to traveling the world – there are many things in life that we want to accomplish.