Science Magazine

How and When to Rebalance Your Investment Portfolio?

Posted on the 30 May 2020 by Gaurav Tiwari @wpgaurav

Investors are a lot like tightrope walkers. If the high risks pay off, then there is a lot there to admire and the reaction is an impressive one. However, if the executor is poorly trained the injuries can be very damaging. The key skill for these two daredevils to master and finesse is balance. In this article I will discuss on how and when to rebalance your investment portfolio.

How and When to Rebalance Your Investment Portfolio?

Asset Allocation

Whether you like to make pie charts or prefer to work numbers and percentages, it is critical that you take time to notice and analyze market trends.

Typically, let's say you have a fifty-fifty split with your investments, in stocks and bonds. If stocks are doing better, then it's time to raise your percentage in your equity proportions. However, allocating your assets is also about risk control.

It's about understanding the volatile nature of the rise and fall in the stock market. Each year, you must be prepared to sell stocks to get back to a stable point so that you don't lose out on a steady return.

Keep Watch on Financial News

The Dow Jones, Nasdaq, and NYSE etc. are crucial places to keep up to date with financial news and changes in the market. Creating a stocks to watch list and keeping up to date with what's moving that market will help you to create the most rewarding financial profile.

There is no set formula as to how you go about selecting your stocks, but knowing what can move the market is important. It is a very subtle blend of being shrewd but decisive and active at the same time.

You have to follow supply and demand rates and plot when is the best time to invest in a specific stock. In order to organize your prospects effectively and lucratively, you really ought to have an interest in the market's strongest players. There are several big areas to consider such as software, commodities, retail, automotive etc.

See: Zerodha Margin Calculator

Personal Considerations

Finances and emotions combined can often lead to an unmitigated disaster. Think of a buzz wire game. The coiled metal represents the stock market and your portfolio is the hoop which loops around.

How and When to Rebalance Your Investment Portfolio?

Going at it too quickly and erratically sends the hoop colliding with the metal and off the buzzer sounds. If you can't then regain your composure you will wobble, causing a flurry of jolting bleeps. Yet, if you don't play confidently and swiftly in some ways, you will second guess yourself causing your hand to shake and falter too.

This all means that your attempt at the game will be a rocky and stressful one. Much like your experience in trading will be if you allow your emotions to tip to one extreme or the other.

Extra Suggestions

By being too cautious and slow you will grow anxious and perhaps miss out on several great opportunities.

Yet acting too hastily, in a gambler-like way, could result in you taking unnecessary risks. Iron out the kinks, create a smooth line strategy and adjust your portfolio accordingly.

Decide your comfort zone and use experience to guide you. Work out how much you have to lose, as if this is your primary or secondary income.

Think about whether you have a set time scale to work towards and let this rearrange and fix down your financial checkpoints.


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