The Rebalancing Protocol: Maintaining Your Risk Geometry

Portfolio drift is an inevitable byproduct of a winning strategy. If your stocks go up by 30% while your gold stays flat, your risk profile has changed.

Why Rebalance?

Rebalancing is the act of bringing your portfolio back to its target asset allocation. It forces you to sell assets that have performed well (selling high) and buy assets that have underperformed (buying low).

The Threshold Strategy

Instead of rebalancing by time (e.g., every year), consider rebalancing by deviation. If an asset class moves more than 5% away from its target weight, trigger a rebalancing event.

Tax Implications

In the Indian tax context, be aware of Capital Gains tax when selling. Sometimes 'rebalancing with fresh capital' (buying more of the underweighted asset) is more tax-efficient than selling the winners.