Rebalance portfolio periodically from "summary" of Let's Talk Mutual Funds by Monika Halan
Periodically rebalancing your portfolio is like giving your investment a reality check. It is natural for some investments to perform better than others over time. When this happens, your original asset allocation might get skewed. Let's say you started with a 60-40 allocation between equity and debt. Over time, your equity investments do well, while debt lags. This could mean that your equity allocation is now 70% and debt is down to 30%. Rebalancing means selling some of the outperforming equity and buying more of the underperforming debt to get back to your original 60-40 allocation. Rebalancing helps you take profits off the table when an asset class does well and buy more when it is not performing. It is a way to keep your risk under control. If you don't re...
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