How to Adjust and Renew Your Portfolio

How to Adjust and Renew Your Portfolio

How to Adjust and Renew Your Portfolio

Portfolio rebalancing is the regular maintenance of one’s investments, such as going to a doctor for a checkup or getting your car’s oil changed. The selling off some stocks and buying of some bonds, so that most of the time the portfolio’s asset allocation matches the level of returns you’re trying to achieve and the amount of risk is known as Rebalancing. And while rebalancing does involve buying and selling, it is also a part of a long-term, passive investing strategy i.e, the type that tends to do the best in the long run. The discipline of rebalancing can prevent panicked moves and increase the long-term returns. The Portfolio Management Services are gaining traction nowadays as people who are earning seven figures need proper method of investing to grow their funds.

Why Rebalance Your Portfolio?

Rebalancing the portfolio is the only way to stay on track with the target asset allocation. The percentage of the portfolio is held in different investments, suppose for 80% stocks and 20% bonds. The target asset allocation is the percentage that has to be held in each investment. So that one is comfortable with how much risk you’re taking and keep track to earn the investment along with the returns you need to meet your goals, like being able to retire by age 65. Your portfolio will be more volatile, through as many stocks you hold and the risks you take. By this, its value will change with swings in the market. ThisThis is why so many investors rely more on stocks than on bonds to meet their goals. As a result, stocks tend to outperform bonds significantly over the long run. If the stock market does well, as the value of your stock holdings goes up, the percentage of your portfolio’s value, represented by the stocks, will increase. For example, If someone starts with an 80% allocation of stocks, it may increase to 85%, making your portfolio riskier than you thought it would be. So, in this case, the solution is to sell 5% of your stock holdings and buy bonds with money.
It is a perfect example of Rebalancing.
When the market is doing well, one may have a hard time rebalancing. And no one wants to sell investments that are doing well. So, they may go higher and one may miss it out! We can consider these three reasons in this situation which are as follows:

  1. When you sell an investment that has performed well, you should have locked in those gains. And when you buy an investment and it has not performed well, you get a bargain. So, overall, you sell high and buy low, and this is exactly what all investors hope for.

  2. They may go lower and then you’ll suffer greater losses than you’re comfortable with.
  3. Rebalancing involves selling off only 5% to 10% of your portfolio. So, if you are bothered by the idea of selling winners and buying losers (in the short term), then at least you’re doing it with a small amount of your money.

How Often Should You Rebalance?

Three frequencies with which you may be able to choose to rebalance your portfolio:

  1. According to a set timeframe, only if your target asset allocation has strayed by a certain percentage (a combination of choices 1 and 2), you may rebalance.
  2. You may rebalance once a year at tax time.
  3. You may also rebalance whenever your target asset allocation strays by a certain percentage, like for 5% or 10%.
    The downside of the second option is that you may waste your time and money (in the form of transaction costs) for rebalancing needlessly. There is no point in rebalancing if your portfolio is merely 1% out of alignment with your plan.

Look at Your Overall Portfolio

You need to look at all your accounts. not just individual accounts but also the combined accounts to get an accurate picture of all investments.
You can take the help of your advisor to get portfolio management services which will give a clear combined picture of all your investment accounts.
At Wealthcare, the client’s portfolio is being periodically reviewed to match with the client’s target asset allocation – depending upon goals or risk profile.

Analyze Your Portfolio

How will you analyze or examine your portfolio?
Firstly, you have to see What percentage of your investments are in stocks, cash, and bonds, and how does this allocation compare to your target allocation. You have to see the overall asset allocation. Secondly, you have to find out your overall risks. How much risk do you have? Thirdly, you have to keep a check on your overall fees because everyone wants their investments to be almost zero. Lastly, you have to keep a track of how much you are getting as your return.
Portfolio Rebalancing by Age/Goals

At the age of 25:
If you are 25 years old and you keep hearing that you should invest 80% in stocks, no need to necessarily follow that advice. If you’re comfortable with 50% in stocks and want to keep the other 50% in bonds, it is completely fine.

At the age of 65:
Age 65 represents the early years of retirement, at least for those people who are not able to afford to work anymore. You may think about withdrawing your retirement account assets for income. You may also make withdrawals from multiple accounts. Now, at this age, you understand how the rebalancing process works. This you can do it yourself, or can use a Robo-advisor, or use a real, live investment advisor to help you to consider all the pros and cons of each skill, time, and cost.


It is always advised to check your portfolio every six months with the help of an advisor. You should always keep in touch with your advisor now and then for your portfolio improvement.


CA Mukesh Gupta
CA Mukesh Gupta
Mukesh Gupta is the founder and director of Wealthcare. He is Fellow chartered accountant, Certified Financial Planner and Certified Public Financial advisor. He is in financial services industry since 1994. He conducts free money management sessions for corporates and associations on topics related to Personal finance. His previous engagement was with Birla Sunlife group. He regularly writes on topics related to Personal finance and occasionally appear on electronic media.

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