Last Updated on September 11, 2021 at 6:29 pm
Portfolio rebalancing refers to the realignment of the asset allocation of a portfolio (% in stock/equity, % in bonds/debt) back to the original asset allocation planned for the investment. This is done to control risk and increase the potential for returns.
You can read more about this here:
http://invest-it-yourself.com/rebalancing.php
I have developed a portfolio simulator to help in understanding how rebalancing can make a difference. There is no guarantee that it will result in better returns. However it does make a difference most of the time. You can use this calculator to find how when it is likely to make a difference.
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The calculator contains the following sheets:
1. Notes about the calculation procedure.
2. Rebalancing illustration
3. Rebalancing SIP investments
4. Rebalancing lumpsum investments
5. Rebalancing a retirement portfolio to find out how long a corpus will last
6. Sample data and analysis
The calculator uses historical sensex returns for equity instruments and historical FD returns for debt instruments. You are free to change this to anything else you like.
Give this try and learn more about the benefits of rebalancing.
Download the Portfolio Rebalancing Simulator