POSTED BY April 19, 2013 2:41 pm COMMENTS (9)ON
I need your guidance with respect to asset allocation and rebalancing
I am 28 & planning for my retirement. As on date I have 2 Large Cap & 1 multi Cap MF dedicated to retirement objective.
Everywhere I read that one should rebalance his portfolio probably annually so that your gains are protected. My queries are ….
1) Since I am planning for my retirement is it necessary that from now onwards I have to do it for next 28-30 yrs every year.
2) Is it necessary that for rebalancing I have to open a long term debt mutual fund side by side for 30 years so that equity gains can be transferred to debt fund and I can again start a STP from debt when markets are down to purchase more units. Can’t it be done by keeping the money in SB A/C ?
3) Suppose my SIP investments appreciated upto 2 lks (principal 1 Lk) on some date. Now what I am supposed to do? Buy n Hold or should I book my profit of 1 lk and move it to debt fund or I should sell all my units & transfer to debt fund and carry on with my SIP as usual to equity fund.
Now this seems bizzare but note why I am saying this this ……..
If I protect only my gain of 1 lk and from just next day onwards market start going downward then value of my principal also will go down by the same % and although my new SIPs will earn more units but this 1 lk will keep loosing its value. So why not to bottom out and keep going on with the regular SIP.
4) Now if I go for continious rebalancing where I am getting the benefits of compounding in MF. At the end of 30 yrs. I will find that I have only my Principal amount lying in the Fund.
And while saying all those points it is also true that buy n hold doesn’t work for you even in the long term say 15 years without redeeming anything and waiting for compounding. Although in long run capital protection is there in equity but it may happen that after 15 yrs. CAGR is 21%..after 16 yrs CAGR is 17% etc… So pure gains are never protected.
Finally one thing more Reliance RSF equity Growth is hurting me last 2+ years.I am planning to Stop the SIPs. But then the main question. What to do with the exisiting amount. Should I wait for its good times or sell out. In case of total closure how to invest the lumpsum again?
Hope I have expressed clearly my queries.