Why is Rebalancing crucial in the Teji Mandi Portfolio Strategy?
To start with we quickly want to re-state our strategy and then explain where rebalancing fits in – Teji Mandi combines tactical bets and long-term winners in 15-20 stock portfolio to build a strong long-term investment strategy for our clients.
At the same time, a crucial aspect of our stock-picking is ‘Disciplined Rebalancing’
Periodic Rebalancing reduces investment risk. A successful investment portfolio is as much about asset allocation as it is about managing behaviours and risks. Periodic rebalancing is the best way to identify, monitor, and mitigate associated risks, to build a diversified and wealth-generating portfolio.
How do we identify stocks for rebalancing?
There are two types of rebalances Strategic and Tactical Rebalances. Strategic rebalancing focuses on the long-term goals, maintaining the proportion of the original portfolio. Tactical rebalancing is more active. The goal here is to manage the assets in the short term. The focus is on minimizing the risk exposure while pursuing new opportunities.
We maintain a stringent carefully measured process for rebalancing – and restrict it to up to 2 times a month. We do not have a specific frequency for this – we carefully hunt for opportunities across the 500 stocks in the NIFTY universe and shortlist stocks that fit our criteria. After thorough fundamental analysis of the stock, competition and sector we plan out our rebalances.
How do I rebalance?
We will notify you on every rebalance via email, push notification and Whatsapp message. Click on the link in the message to execute the rebalance.
If you have not invested through us, you will show you what trades you need to execute.
You can also tap the “Rebalance Now” button on the home screen to rebalance.
We have detailed the process in a separate post here for our app subscribers and here for our smallcase subscribers.
What if I miss a rebalance?
Nothing to worry about – you can always rebalance later by tapping the Rebalance Now button.
What if I do not wish to rebalance?
We do not recommend this and that is why we mandate rebalancing. We will also add an option to skip/archive a rebalance in the near future (although we do not recommend this)
Why must I add more money to rebalance?
When we rebalance, we sell a stock and use the funds from the sale to fund our buys on the new stocks. In some cases, due to the changing prices in the stock market, the amount leftover from a sell is not enough to cover a buy order. Hence you must add funds to execute the rebalance.
SEBI has also mandated certain margin requirements on orders where only 80% of the funds available can be used to fund purchase orders. This is another reason why you might need to add funds to execute a rebalance.
Our recommendation to clients is to maintain a small buffer of funds with your broker to ensure seamless rebalancing. Your funds are safe with the broker and unused funds will be returned to you on a quarterly basis.
Any other questions on rebalancing? Email us at [email protected] and ask away!
