Made a 39% CAGR? Book, rebalance, repeat - Experts shares why ignoring rebalancing can cost you crores

As market conditions change, asset classes like equities, debt, gold, and real estate perform differently. Over time, this leads to a drift from your original asset allocation, potentially increasing risk or reducing returns. Rebalancing helps restore your portfolio to its intended balance, ensuring it aligns with your financial goals.

X user Efiletax noted, “The market doesn’t reward passive hope. It rewards disciplined action. That ₹85 lakh notional gain you’re sitting on in 5 months? It’s not real until you book profits. A 39% CAGR in a volatile market isn’t luck—it’s timely exits and strategic rebalancing.”

Smart investors follow a simple formula:

Book profits when an asset class overheats.
Rebalance by moving gains into undervalued or lagging assets (debt, gold, international equity, etc.).
Repeat the cycle consistently, not emotionally.

As Efiletax added, rebalancing isn’t about chasing returns; it’s about managing risk and returns together. It shields investors from portfolio concentration, sharp drawdowns, and missed opportunities.

Earlier, Akshat Shrivastava, founder of Wisdom Hatch, shared a pointed anecdote. A friend once asked, “Is there a way to invest where I never have to look at my portfolio?”—a sentiment many passive investors echo. Shrivastava pushed back, stating, “I am NOT a buy-and-forget investor. I think it is a very foolish strategy. Gone are the days when you could pick a good business, invest, and forget. Even trillion-dollar monopolies like Amazon fell 55% in 2022 due to valuation corrections.”

These examples underscore the need for active portfolio management to navigate market cycles.

Regular reviews are vital. Experts recommend monthly or quarterly performance checks, along with an annual review of investment goals and asset allocation. This helps align portfolios with life stages, evolving goals, and market conditions. During volatile times, more frequent reviews may be necessary, while periods of stability might require fewer adjustments.

Rebalancing strategies should also reflect individual life stages. Younger investors may adopt aggressive rebalancing to fund major life events, while those nearing retirement might opt for conservative moves to preserve capital. It's also crucial to factor in costs—like brokerage charges and taxes—when rebalancing, to avoid eroding returns.

While long-term investing remains viable, success depends on choosing the right asset classes and understanding market cycles. Frequent trading isn’t always beneficial—it’s about making smart, cost-effective adjustments when needed.

Lastly, incorporating macroeconomic and political insights can further sharpen your investment strategy, enabling well-informed decisions that align with both short- and long-term goals. In an ever-evolving market, strategic foresight—not passive holding—is what truly drives sustained success.