![]() While we might not have a very sharp V-shaped movement, markets should start to move into a positive trajectory in the medium to long term. It also helps to ensure that your investments remain properly allocated so that your portfolio is aligned with your long-term risk and return expectations.Īll in all, the current market volatility may continue. This definitively establishes that portfolio rebalancing can not only enhance returns but also reduce risk and shorten the amount of time it takes your portfolio to recover following a bear market. ![]() your allocation in equity or debt might not be the same that you had planned earlier and the expected rate of returns gets considerably affected, adding extra risk to the portfolio.Ī study conducted, taking into account the most volatile periods, showed that the maximum drawdown in the portfolio, for example, during the 2000s recession crisis and the 2008-2009 crisis rebalanced portfolio, took half the time to recover as opposed to the one that wasn’t rebalanced. However, during a rally or a correction, this asset allocation strategy shifts, i.e. Basis the risk appetite and the time horizon, the asset allocation strategy is devised to reach the portfolio objective of the investor at a considerably lower risk, i.e. This is crucial to ensure that the risk-return matrices are also maintained. Periodic monitoring is very critical in maintaining the pre-decided portfolio objective. For instance, if your allocation strategy as per the plan is Equity: Debt 60:40, and over some time (more than 18 months at least) this allocation moves more than 12-15% from the original allocation, you need to consider rebalancing your portfolio.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |