Skip to main content

Adjust portfolio if allocation to have right asset allocation strategy

Invest Mutual Funds Online

Call 0 94 8300 8300 (India)


   The stock market index belied investor expectations last financial year as predominantly global concerns stained its performance. Adding to the woes were scams that weaned the faith of foreign institutional investors (FIIs). Fund managers and investors panicked, and succumbed to selling pressures with concerns over the unrest in Egypt.


   Rising food prices and inflation have left small investors with little surplus for investments. Increase in home loan rates has increased the financial burden on homeowners. These additional factors have compounded to volatility in the stock markets. Is it time to shuffle your portfolio?

Don't shuffle for short-term gains    

Shuffling is also referred to as rebalancing. Rebalancing is periodic adjustment of a portfolio to restore the original asset allocation mix. If your investment strategy or risk threshold has changed, you can rebalance your investments so that the asset classes in the portfolio align with your new asset allocation plan.


   Do not indulge in shuffling your portfolio for short-term market changes. Rebalancing is a well planned quarterly or annual activity. It helps you book profits within your portfolio effectively and reduces risk exposure by maintaining the primary asset allocation.


   A booming market provides excellent opportunity to make profits. Consequently, the equity exposure in your portfolio increases phenomenally. This makes the percentage of debt investments lesser as compared to the original debt allocation. An investor is usually driven by the desire to reap greater yields in upward-bound equity markets.

Benefits of rebalancing    

It requires considerable effort and strategy to reap good returns in a falling market. Anyone can make it rich in a bull run but not in a downward-bound index. Investors usually stay away from equity markets in choppy conditions. Despite the market condition, an investor must re-align his portfolio of investments that have strayed away from the original asset allocation strategy periodically.


   There are numerous benefits from this exercise. Rebalancing helps your portfolio remain at your risk tolerance level. An asset allocation strategy is chalked out based on your age, risk appetite, financial goals, investment objectives, savings, debts, income flow and years left before retirement. The portfolio could become conservative or risky based on fluctuations in the stock markets. Rebalancing restores the portfolio to the original asset allocation plan to meet your goals.

CASE STUDY

Maheshwar has received a bonus of Rs 2 lakhs and wants to invest. Being a person with a moderate risk appetite, he prefers an asset allocation mix of 60 percent in debt and 40 percent in equity. He locks Rs 1.20 lakhs (60 percent of Rs 2 lakhs) in banks deposits, post office monthly income schemes and fixed maturity plans (FMPs). The remaining Rs 80,000 (40 percent of Rs 2 lakhs) is invested in stocks.


   After a year, Maheshwar discovers that the value of stocks in his portfolio has gone up by 40 percent and has become Rs 1.12 lakhs. On the other hand, his investments in debt have become Rs 1.32 lakhs (at 10 percent returns).


   He must rebalance his portfolio to get back to the original asset allocation mix of 60 percent debt and 40 percent equity. In line with his risk appetite, he sells some shares and reinvests in debt instruments that he is more comfortable with. Currently, his total investments are valued at Rs 1.12 lakhs plus Rs 1.32 lakhs, i.e., Rs 2.44 lakhs. At the end of the rebalancing exercise, he must have 40 percent of Rs 2.44 lakhs in stocks and the remaining locked in debt.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

 

---------------------------------------------

Invest Mutual Funds Online

Transact Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Fund Application Forms

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online

      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online

      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online

      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online

      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver Mutual  Funds  Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online

      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

 

 

Popular posts from this blog

ICICI Pru Mutual Fund Dividend

ICICI Prudential Mutual Fund has announced dividend under the following schemes: Scheme Dividend ( Rs /unit) ICICI Pru Capital Protection Oriented Ser V Plan B-D 0.03611325 ICICI Pru Capital Protection Oriented Ser V Plan B Direct-D 0.03611325 ICICI Pru Balanced Advantage Direct-DM 0.06 The record date has been fixed as February 08, 2017. ------------------------------ ------ Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds Top 4 Tax Saver Mutual Funds for 2017 - 2018 Best 4 ELSS Mutual Funds to invest in India for 2017 1. DSP BlackRock Tax Saver Fund 2. Invesco India Tax Plan 3. Tata India Tax Savings Fund 4. BNP Paribas Long Term Equity Fund Invest in Best Performing 2017 Tax Saver Mutual Funds Online Invest Best Tax Saver Mutual Funds Online Download Top Tax Saver Mutual Funds  Application Forms For further information contact  SaveTaxGetRich on 94 8300 8300 ------------------------------ ------ Leave y...
Read more

What is Financial Freedom?

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)     There were many things common between our Freedom fighters. All had the Single vision (Free India), common goal (independence) and had a disciplined and focused approach. They were ready to do anything and everything and had made so many sacrifices to see India free . But the road to freedom was not easy .They had faced lot many hardships, went to jail so many times and even confronted physical and mental torture from the British. There was one more thing which proved to be an advantage to our fighters that most of them were professional lawyers. The knowledge of legal issues and its impact on our country at large has helped them counter various bills and proposed new laws by the then government. It is due to their continuous effort that we are able to achieve the goal of Independent Indi...
Read more

Hidden Bank Fees

  What Banks Hide From Customers Imagine after a peaceful and exciting holiday you receive your bank statement with steep charges. You then rush to your bank and start confronting staff members and to your dismay, you come to know that the high end debit card was charged very heavily. Wouldn't this cause damage to your finances? So remember, the world outside is full of deceptive and double cheating people. Unethical practices are always used by company sales person in order to meet the target. Credit card companies, mutual funds and bank institutions always play dirty tricks to lure customers and the practices are rampant. So here's how you should be careful while dealing with your banks: High End Debit Card Charges While opening an account with a bank you opt for a debit card with minimal charges. But later on when you upgrade your card and opt for high end debit card the annual charge rise by a good amount. Though such a card has slew of features but it all comes at a high ...
Read more

Partial withdrawal from PPF

  Public Provident Fund (PPF) account has a lock in period   If you opened a PPF account to meet your retirement needs,, think twice about withdrawing from this fund before retirement. But provided it's an emergency here are the rules. Public Provident Fund (PPF) account has a lock in period before which you cannot withdraw your money.   The partial withdrawal is allowed after the completion of 6 financial years . This means that you will be allowed a partial withdrawal from 1 April 2017. The maximum partial withdrawal allowed is the least of the following: 50 percent of the account balance at the end of fourth financial year, 31 March 15 50 percent of the account balance of the end of previous financial year, 31 March 17.   There's a loan option available on your PPF account between the fourth and the sixth financial year. You can obtain a loan of up to 25 per cent of the balance in your account. However, this will attract interest of 2 percent more than the prevailing ...
Read more

Updating a minor PAN card upon becoming adults

  Updating a minor's PAN card once they become adults A PAN card issued in the name of a minor does not contain the minor's photograph or signature, and therefore, cannot be used as a valid proof of identity. Once a minor PAN card holder turns 18, the relevant changes must be made in the PAN records. A new card is then issued bearing a photograph and signature. Application The applicant is required to fill up the "Request for new PAN card andor changes or correction in PAN data" form. The form can be filled up online by accessing NSDL's Tax Information Network website and clicking on the online PAN application tab. Information The applicant must mention the existing PAN number in the application and check the `photo mismatch' and `signature mismatch' boxes, and submit the online form. The form must also be printed out, signed by the applicant, and submitted along with two photographs. Documents Identity and address proof in the form of a copy of the app...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now