Get answers to all the burning questions related to rebalancing and the approach Teji Mandi takes when rebalancing.
What is a Rebalance?
When constructing a well-balanced equity portfolio, we at Teji Mandi analyse various companies and assess their potential returns.
As a result, we examine our portfolios’ stocks to ensure they align with the market and your goals. Throughout the process, we focus on avoiding exposure to your portfolio to risk and ensuring it is up to date with emerging market trends. We then replace underperforming assets with others that have greater promise. This process is referred to as a “rebalance.”
Here, We Might Do the Following Things:
- Exit a stock and replace it with a better opportunity.
- Change the weight of a stock in the portfolio (book a profit or double down).
Why Should You Rebalance?
Rebalance’s primary purpose is to ensure sufficient risk management and return maximisation. Periodic rebalancing also reduces investment risk. Periodic rebalancing is the best way to identify, monitor, and mitigate associated risks.
As an investor, it benefits you in two ways:
- During volatile times, protect your investments.
- Take advantage of the possibilities that arise from time to time.
How does Teji Mandi decide when to rebalance?
While maximising returns seem appealing, as fund managers at Teji Mandi, we ensure we provide meaningful capital protection to all our clients.
We identify, monitor, and mitigate associated risks for all Teji Mandi clients through periodic rebalancing.
We carefully hunt for opportunities across the NIFTY universe and shortlist stocks that fit our criteria. After a thorough fundamental analysis of the stock, competition and sector, we plan our rebalances.
The following are the basic fundamentals we consider when deciding to exit stocks from our portfolios:
- The fundamentals of a company or the industry have begun to shift.
- Too much negativity surrounding the company or the sector.
- A severe macroeconomic or a market condition.
Types of Rebalancing Updates
There are two types of rebalancing updates:
Strategic rebalancing focuses on long-term goals, maintaining the proportion of the original portfolio.
Tactical rebalancing is more active. The goal is to manage the assets in the short term.
💡 If you’re a subscriber to our portfolios, you’ve probably noticed that the Flagship portfolio is rebalanced more frequently than the Multiplier. This frequency is related to the Flagship portfolio’s strategy. Because Flagship incorporates stocks from both the long and short term, the frequency of rebalancing increases.