Long term investing: why should you actively rebalance?

long term investing: why should you actively rebalance?

Level - INTERMEDIATE

Watch this investor education video by Moneykraft to understand why long term investment needs active monitoring and rebalancing if the end goal value has to be protected.

AUTHOR(S): Taruna Changulani

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Long term investing: Why should you actively rebalance?

 Watch this video to understand why long term investment needs active monitoring and rebalancing if the end goal value has to be protected.

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    1.Based on historical as well as expected returns on equity, Madan expects his investment in an equity oriented fund to grow to Rs.20 lakh after ten years. The actual end value after ten years



  • Will be more than 20 lakh, as there would have been at least one bull cycle in that period
  • Cannot be predicted, depends on market prices at that time
  • Will be less than 20 lakh, as actual returns are usually higher than historical returns
  • 2.Your equity investments have earned an average return of 15% over the past 20 years. This implies



  • A steady return of 15% each year
  • A return of 15% in the middle year of the holding period
  • Ups and downs in returns, but average works out to be 15%
  • 3.Investors should rebalance their portfolio towards debt closer to their goal so that



  • To protect the end value from volatility of equity markets
  • To take advantage of higher returns from debt
  • To ensure ease of redemption of end value
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