Friday, December 04, 2020

Profit booking or Asset Allocation Rebalancing. What is recomended ?

Profit booking
Or
Asset allocation rebalancing ??
What is recomended?

Invested 1 lac 8 months ago and today value is 1.43lac

Profit booking would mean, 43 thousand removed from total investment, where as , asset rebalancing would mean where ever the drift is away from the original set allocation, bring it back to original one

Here's the example of Asset allocation rebalancing
If Rs 1 lac invested in April,20 in say 80:20 equity to debt ratio,and if current value is say 2 lac

So 80000 should have been 1.6 lac in equity in terms of 80:20 ie 80% in equity.
Say if that is currently 1.8 lac, it is said to rebalanced ,once it is brought back to 1.6 lacs

Here profit booking is natural and the added advantage is risk is also naturally taken care off,plus, market or index calls matter least

Plus, in profit booking, what to do of that 43000 as in above example , is always a questiin, where as asset allocation rebalancing is always answer by itself on next step

#FNquote #financialplanning #financialfreedom #mutualfunds #investing #personalfinance

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