When we think of long-term investing, many of us imagine putting money into a fund, sitting back, and letting time (and compounding) do its magic. Sounds simple, right? But as Uma Shashikant pointed out in her piece “Long-term investing comes with power to rebalance portfolio as and when needed” ( Mint , 2023), long-term investing doesn’t mean ignoring your investments completely. In fact, one of the biggest advantages of being a long-term investor is having the chance to review and rebalance your portfolio whenever needed.
So why is rebalancing so important? Over time, different types of investments (like equity and debt) perform differently. For example, between 2020 and 2023, the Indian equity markets delivered around 12-14% average annual returns (NSE data), while debt funds gave about 6-7%. That means if you started with a plan like 60% equity and 40% debt, without even realizing it, your equity could grow and take up 75% of your portfolio! That increases your risk and might not suit your original goals.
Rebalancing simply means adjusting your investments to get back to your chosen mix. So when markets boom, you might book some equity gains and move a little to safer options. When markets dip, you can pick up equity at more attractive prices. It’s a smart way to manage risk, avoid making emotional decisions, and keep your wealth-building journey on track.
And here’s some proof: a Vanguard Global Study (2022) found that portfolios rebalanced at least once a year had up to 20% lower volatility and no compromise on returns. That means smoother rides through market ups and downs!
The bottom line: Long-term investing is powerful, but it’s not about forgetting your money. It’s about being thoughtful, checking in regularly, and rebalancing when needed. That’s how you truly make the most of compounding and stay on track for your goals.
If you’d like help reviewing your portfolio or understanding rebalancing strategies, just reach out — We’re here to assist.
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