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/learn/asset-allocation-rebalancingWealth Strategies: SIP & SWPPortfolio Mastery5 min read
Asset Allocation & Portfolio Rebalancing
The secret to sleeping peacefully at night: How mixing Equity, Debt, and Gold controls volatility.
Core Takeaways for Indian Investors
- ✓Asset Allocation determines over 85% of long-term portfolio return variability, far more than individual stock picking.
- ✓Classic Indian rule of thumb: Equity % = 100 minus your Age (e.g. at age 30, 70% Equity and 30% Debt).
- ✓Rebalancing forces you to sell high and buy low without guessing the market.
- ✓Review and rebalance once a year or when an asset class drifts by more than 5-10% from target.
#1Why Rebalancing Feels Counter-Intuitive but Works Wonders
Suppose your target allocation is 70% Equity and 30% Debt. During a raging bull run, your stocks soar and your allocation becomes 80% Equity and 20% Debt. Rebalancing requires you to sell some equity gains and buy debt instruments. When the market inevitably corrects, you use that safe debt money to buy equity on sale!
Knowledge Check: Test Your Understanding
1 QuestionWhat is the primary objective of annual portfolio rebalancing?