“You don’t make any money in the stock market until you sell…”, and this is the reality of the stock market. Rebalancing your portfolio takes care of that.

What rebalancing of portfolio means

Well, as word ‘rebalance’ explains itself. If you built your portfolio with say five stocks, and invested 20% of your portfolio worth in each stocks. As time passes, with market volatility and other factors, few stocks jump up substantially and few might fall down to your purchase price. Rebalancing is the activity which brings back value of each stocks proportionately to what its portfolio looks at that time. So you sell few stocks that have climbed up substantially and invest those funds in the one who had fallen down.

Below are the 3 portfolios after rebalancing done yesterday.

Portfolio One

Name Quantity Purchase Price Current Price Total money invested Current position Standing
Axis Bank 511 INR 391.10 INR 550.55 INR 199,852.10 INR 281,331.05 40.77%
JK Bank 2985 INR 67.00 INR 65.85 INR 199,995.00 INR 196,562.25 -1.72%
Castrol 533 INR 375.00 INR 441.90 INR 199,875.00 INR 235,532.70 17.84%
TCS 90 INR 2,226.60 INR 2,708.25 INR 200,394.00 INR 243,742.50 21.63%
coal India 660 INR 302.85 INR 326.45 INR 199,881.00 INR 215,457.00 7.79%
cash INR 31,542.75
Total INR 999,997.10 INR 1,204,168.25 20.42%
NSE 500 INR 5,833.40 INR 7,335.05 25.74%


Portfolio Two

Name Quantity Purchase Price Current Price Total money invested Current position Standing
Axis Bank 442 INR 420.68 INR 550.55 INR 185,940.56 INR 243,343.10 30.87%
JK Bank 3603 INR 66.80 INR 65.85 INR 240,680.40 INR 237,257.55 -1.42%
Indiabulls housing 316 INR 686.44 INR 762.65 INR 216,915.04 INR 240,997.40 11.10%
TCS 91 INR 2,311.29 INR 2,708.25 INR 210,327.39 INR 246,450.75 17.17%
coal India 737 INR 305.32 INR 326.45 INR 225,020.84 INR 240,593.65 6.92%
cash INR 1,338.05
Total INR 999,997.10 INR 1,209,980.50 21.00%
NSE 500 INR 5,833.40 INR 7,335.05 25.74%


Portfolio Three

Name Quantity Purchase Price Current Price Total money invested Current Position Standing
Axis Bank 430 INR 417.06 INR 550.55 INR 179,335.80 INR 236,736.50 32.01%
Indiabulls housing Finance 307 INR 686.26 INR 762.65 INR 210,681.82 INR 234,133.55 11.13%
Coal India 717 INR 304.73 INR 326.45 INR 218,491.41 INR 234,064.65 7.13%
TCS 89 INR 2,302.37 INR 2,708.25 INR 204,910.93 INR 241,034.25 17.63%
cash   INR 235,580.85
Total INR 999,997.10 INR 1,181,549.80 18.16%
NSE 500 INR 5,833.40 INR 7,335.05 25.74%


Many investors have asked me about how often they should rebalance their portfolio as it turns out to be very expensive exercise. In my opinion, for example, individuals who relate themselves with Portfolio One, should only rebalance their portfolio once every year. Individuals who relate themselves with Portfolio Two should do twice in the year. Professionals like us, who manages others money do this every month. This is because we get fresh money into our funds every day that we need to allocate in our portfolio according to our investment strategy, which pretty much resembles to Portfolio Three.

Investors who do SIP (Systematic investment plan) which is self-managed for investments in the stock market, if they are keeping big amounts aside every month for investments in the stock, they should prefer to rebalance their portfolio every quarter.

Aziz Dodhiya is the chief investment officer for the Valueoperations funds which operates in the Indian market as an FPI (Foreign Portfolio Investor). We do not offer any personal advice to buy or sell any stocks and the views that are shared by Aziz might not incline to your personal investment strategy and this is the reason we advise you to take professional advice before going ahead with our views.