Hello <insert your most embarrassing nickname>👋👋😂😂
I am exhilarated with where the Indian Equity Market is headed. Nifty hit an all-time high crossing the 19,000 mark, and Sensex reached above 64,000 on Wednesday after attempting to get there for a few days, thanks to mass profit booking! (More about this soon)
That aside, I want to take a moment to heave a sigh of relief and appreciate how investing has weathered the storms from hitting India over (almost) the past year while the entire world was toiling with recession or potential recession scares. This is living proof that better times are underway, and there is a great chance to see an upward trend from now!
But with the Nifty and Sensex soaring to all-time highs, and the stock market sizzling with enthusiasm, your portfolio is begging for a touch of magic to keep up with the ride. What would you do? If you do not have a definite answer, you gotta keep reading, my friend! We will be unveiling the secrets of portfolio rebalancing and discovering its perks, all while decoding the mystical indicators to tame the swings of the market.
Here’s what’s in store for you:
Market performance comparison
What truly happens when the market is soaring
Fool-proof rebalancing strategy
Coolest film I watched this month
What NOT to do when the market is up 📈⬆️
And so much value in one place, you absolutely shouldn’t miss
🤨 ‘Sup with the market
😱 What Really Happens When The Markets Are Up?
Typically, a growing economy backed by geopolitical factors, much like PM Modi’s visit to the US, thickening the relations between India & the States leads to greater investor confidence. This means that many potential/existing investors have expectations of a profitable future, increasing the buying activity that pushes the prices higher.
Eventually, markets often face a dip immediately after hitting a high because many investors indulge in profit booking when they see their portfolios in the green! Profit booking is the practice of selling an investment that has appreciated in the current market price to realize gains instantly. It all works pretty much like this:
This is precisely why rebalancing your portfolio to adjust stock/asset allocation by buying or selling investments that no longer add value is crucial. (Read on to learn about Fool-Proof Rebalancing Strategies)
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I got grabbed the chance to watch Satyaprem Ki Katha, and I must say, it left quite an impression on me. This thought-provoking film delves into an important issue prevalent in our society. If you're looking for a flick to watch over the weekend, SPKK is worth a try.
📌 4 Tips For A Fool-Proof Rebalancing Strategy Ft. Shreya Jaiswal
There is a farrago of misinformation about investing, and I tend to see a lot more of those when the market is on a spree. So I rang up Shreya, who’s a fellow FINfluencer on a journey of sharing her insights about tax, finance, and the business world. She’s a Chartered Accountant with a specialization in Direct Taxes and is here to give you 4 tips to build a fool-proof rebalancing strategy!
1. Understanding your target asset allocation
Decide what's your investment strategy in terms of the instruments you want to invest in, the duration, the proportion of your portfolio division, etc., based on your risk capacity. This should be a very personal process aligning with your future goals, so please don't assume what works for someone else might work for you.
2. Rebalancing Threshold
When any particular asset is increasing or decreasing in value, it completely changes what your portfolio looks like, and this is exactly why rebalancing is key. Let’s say my ideal ratio of debt to equity is 30:70. When the markets are down, and debt is performing as expected, the proportion might change considerably to accommodate more debt instruments. Similarly, arrive at a threshold to rebalance your portfolio to decide at what point you would turn to rebalance your portfolio.
3. Revisit your allocation strategy
Assume that your asset allocation was 80:20, and it gets flipped to 90:10 due to market fluctuations. Once the market settles, you may want to check if you have to rebalance it. However, you don’t need to go back to the 80:20. What people often miss is the miscellaneous changes such as the loss of a job, medical expenses, an increase in income, or just a better understanding of the market. So, whenever you reach your threshold and want to rebalance your portfolio to previous allocation levels, you might want to reconsider your allocation strategy altogether to see if it aligns with your current situation.
4. Factor in the taxes too!
Every asset has a different taxation impact under the Income Tax Act. While you might need a portfolio reallocation, please ensure you're well aware of the tax implications so it is in tandem with a taxation strategy that reduces your tax burden.
🍸 Cocktail Pe Charcha
Is it too overwhelming to research & plan your investment? Say no more, we can personally guide you into mixing the perfect financial cocktail to manage your money!
As we journey through the ever-changing landscape of investments, one thing remains certain: rebalancing is the unpopular secret ingredient that keeps your financial journey on track. Just like a skilled navigator, you have the ability to adjust the sails and steer towards greater prosperity. So, embrace the art of fine-tuning your investments, seize opportunities to book profits, and let your portfolio soar to new heights. May your financial path be filled with abundance and success!
You know it! I'll write to you soon,
Sayali ❤️
P.S. Totally wanted to add #SayaliKiRai to that epic manifestation for a conclusion
