Sunday, October 17, 2010
Portfolio rebalancing is the process of bringing the different asset classes back into proper relationship following a significant change in one or more.
More simply stated, it is returning your portfolio to the proper mix of stocks, bonds and cash when they no longer conform to your plan. An example might help.
Say you have determined that given your risk tolerance, time horizon and financial goals that your portfolio should look like this:
• Total 100% Rs. 100,000
We’ll use a starting total portfolio value of Rs. 100,000 so the math is easy and the rupees and percentages match.
A couple of your stocks catch on fire and before you know it, your portfolio looks like this:
Portfolio rebalancing is an important part of sticking to your game plan. You should look at your portfolio at least quarterly in terms of rebalancing and more frequently if you have had a significant gain or loss in any asset class.
How to Rebalance Your Stock Portfolio?
Stock Portfolio Management|