Mid-year portfolio review: Trim equity exposure after surge

Enhance term cover if liabilities have increased; boost health coverage to match medical inflation

- BINDISHA SARANG

With the equity markets surging, most major categories of equity funds have given high double-digit returns year-todate. While an annual review is usually sufficient, a mid-year review becomes advisable especially in the years when one asset class has far outpaced others. Besides investments, several other aspects of one's finances should also be reviewed.

"Your money life is very different today than when you started in January. A mid-year review makes the end-of-year financial review manageable and less stressful," says M. Barve, founder, MB Wealth Financial Solutions.

Rebalance investment portfolio

Rebalancing becomes essential when your asset allocationthat is, weight of equity, debt and gold-strays from its original strategic level. "Equity has performed exceptionally well, so its allocation would have increased in many portfolios," says Jigar Patel, member of the Association of Registered Investment Advisers (ARIA).

Take an example. Suppose that at the start of the year, an investor had 70 per cent allocation to equity, 20 per cent to debt, and 10 per cent to gold. Small deviations can be ignored. However, if the equity allocation has gone above 75 per cent, it would be prudent to rebalance. Failing to do so would increase portfolio risk.

Investors must also examine their sub-asset allocation (allocation to large, mid and smallcap funds). "Mid and small caps look expensive. They are at 25-30 per cent above average valuations. This is a prime area for rebalancing," says Tarun Birani, founder and chief executive officer (CEO), TBNG Capital Advisors.