The Mutual Fund Show: Is Rebalancing Your Portfolio A Good Idea?

There are two parameters where profit-booking and rebalancing can be done, according to Rushabh Desai, founder of Rupee With Rushabh. If the small and mid-cap segment have significantly increased beyond initial allocation, one can consider rebalancing; and if a financial goal is approaching within the next six months to a year, it may be advisable to rebalance, he said.

Rebalancing should not be done very frequently in the short term, advised Desai. Portfolio strategies on profit-booking and rebalancing are subject to taxation, and it's not advisable frequently and in the short-term, according to him.

"If portfolio rebalancing is skewed towards small and mid caps, then stay invested if you have a long-time horizon. The SMIDs are very important for wealth creation," Desai said.

This year has been marked by a period in which we initially observed some negativity in the markets and concerns about global growth slowing down, according to Mahesh Patil, chief investment officer of Aditya Birla Sun Life Asset Management Co. However, taking a broader global perspective, the growth has actually pleasantly surprised on the positive side.

India experienced an initial downturn in February and March. The current market outlook appears to be quite stable, he said. "We are seeing moderation in earnings growth," Patil said.

The slowdown in the US economy could potentially be more pronounced, presenting a significant risk to be mindful of in the latter part of the calendar year. Geopolitical risks persist in relation to the Federal Open Market Committee and their impact on the market, he said.

Query 1: I want to save Rs 1 crore over the next five years. What should be my SIP amount, and can you suggest a few funds?

Name: Sandhya Nagarajan I Age: 25 years

Rushabh Desai: A period of five years is quite short for SIPs. It is advisable to have a minimum time horizon of seven years if you are entering the pure equity segment. For a five-year time horizon, I would suggest considering a Balanced Advantage Fund.

Query 2: I am in the process of generating a retirement corpus of Rs 1.5 crore, for a monthly income of Rs 1 lakh. I have been investing in three funds via SIP for the past five years and plan to invest for the next five. Have I chosen the right funds, and do I need to change my strategy?

Name: Ritesh Nair I Age: 50 years

Rushabh Desai: I suggest that he should consider diversifying his investments. He could allocate 60% to flexi-cap funds, which should include two or three funds—one mid-cap fund and one small-cap fund. Additionally, he should invest in 5-6 funds with different styles, focusing on growth and value over an extended period.