Listed below are some tips that you need to know about Portfolio Rebalancing:
- Rebalancing of portfolio refers to the process of changing the weightages of varied assets that make up a portfolio. Rebalancing helps realign the portfolio to an allocation of your choice.
- The process of portfolio rebalancing does not come with any set specified time periods. It is however advisable to conduct at least one review of the varied allocations per year. If a specific year has some major movements in the market, then increase the instances of portfolio rebalancing during that year.
- Rebalancing of the portfolio allows people the chance to sell off their holdings in a specific stock when it is at a high and purchase assets at lower value, thereby allowing investors to book gains or profits over time.
- Portfolio rebalancing also helps minimize taxation effects and transaction costs. Instead of liquidating or selling of current assets, investors can add more money whenever possible to rebalance the portfolio.
- When rebalancing is done on a regular/periodic basis, then a discipline is introduced into the process of investment, thereby helping decrease risk and ensuring alignment of the portfolio to your financial goals.