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.
Denne historien er fra June 2024-utgaven av Investors India.
Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.
Allerede abonnent ? Logg på
Denne historien er fra June 2024-utgaven av Investors India.
Start din 7-dagers gratis prøveperiode på Magzter GOLD for å få tilgang til tusenvis av utvalgte premiumhistorier og 9000+ magasiner og aviser.
Allerede abonnent? Logg på
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.
Microbiome: The Invisible Ecosystem Within us that Safeguards our Health
Imagine being able to heal yourself and build immunity against major diseases without relying on heavy medication. It sounds fantastic, right? Who wouldn’t want that? The key to achieving this lies in a fascinating area of research—our microbiome.
Gold ETFs: Attractive option for retail investors to take exposure to yellow metal
With the equity market experiencing volatility in August, investors are increasingly seeking to diversify their portfolios.
The Retail Revolution: How India's Stock Market Got a Makeover by the Common Man
In the annals of India’s financial history, the stock market has long been the playground of the big boys—mutual funds, insurance behemoths, and foreign portfolio investors (FPIs).
Strategies to adopt when the markets are at a high (for new and existing MF investors)
An investor must have a plan in place and, more importantly, stick to it regardless of shifting market conditions.
A Collaboration to keep Health FirstPNUT and IDA come together as One!
You reap what you sow! And if you sow health, you will reap a healthier tomorrow. Following the same lines, Personal Nutrition (PNUT) and Indian Dental Association (IDA) have come together as partners to promote complete health and nutrition for each individual! How things unfolded? Let’s explore.
Making a choice between equity and debt mutual funds for long-term goals
Mutual funds are quickly becoming a preferred investment choice for millennials.
ASK THE EXPERT
From last Financial Year, I have shifted to the new Tax Regime.
Flexi-cap Fund Vs Hybrid Fund
Investors in mutual funds can choose from equity, debt, or hybrid funds, each offering different risk and return profiles. Flexi-cap funds provide diversification across market capitalisations, while hybrid funds balance equity and debt for stable returns.
Neuroplasticity: You Can Teach An 'Old' Brain New Skill
A few decades ago, it was believed that the brain’s structure and functions were entirely dependent on genetics, age, and early childhood experiences.
