ICICIdirect Money Manager – July 2019

ASK OUR PLANNER

The best way to take advantage
of this feature is to follow asset
allocation and rebalancing.
Based on your present & future
financial responsibilities, you
arrive at an allocation for
yourself – say 50% in pure
equity & 50% in pure debt. Your
premiums are invested in the
funds based on the above asset
allocation decision. When there
is a major deviation e.g. equity
allocation rising from 50% to
5 8% due to sudden rise in
markets, it is prudent to switch
the gains to debt part of the
portfolio, and bring the
allocation back to 50-50.

Similarly, when equities deliver

negative returns, you can

switch from debt to equity to

average out your purchase at

lower levels. You can decide on

a threshold, say deviation of

more than 5% (in any or both

asset) from existing allocation,

to act on rebalancing. As you

near your goals you should

ensure major part of the

portfolio is in steady asset class

like Debt, rather than exposed

to Equity. Over a long time

horizon, disciplined rebalancing

will help smooth out the

portfolio volatility and generate

decent risk adjusted returns.

Do you also have similar queries to ask our experts? Write to
us at: [email protected].