Rebalance Your Portfolio
Equity markets were trading near all-time highs when all hell broke loose and a black swan – novel coronavirus – bit the world. Its spread and fears of a looming global recession sent world markets, including India’s, into a tailspin. The fast-spreading virus has triggered unconventional market trends – not just in equities, but also the debt market, and even gold. Debt funds witnessed heavy redemptions in March after bond yields spiked, though the repo rate cut by the Reserve Bank of India (RBI) has now boosted bond prices. Gold, which was at a high in the first week of March, tanked as much as 10 per cent in the following weeks. It has recouped some losses since.
With wild swings in asset classes, if your portfolio has taken a disproportionate shape not just in returns but also asset allocation, this is the occasion to rebalance it as per your life goals. However, extraordinary times require extraordinary measures.
Your equity allocation may have shrunk below your targets. Conventional wisdom says buy more. But should you really dip into equities when longevity of the Covid-19 crisis and its impact on the stock market is not clear? Wouldn’t it be better to take a do-nothing approach?
A person with a key financial goal just a year or two away may prefer the safety of debt instruments compared to someone who can wait at least five years. Similarly,
