Rebalancing means bringing your portfolio back to your target asset allocation. If you aim for 80% equity and 20% debt, and a bull run pushes you to 90/10, you sell some equity and buy debt to return to 80/20.

Why It Matters

• Risk control — Prevents over-concentration in one asset class
• Discipline — “Buy low, sell high” by trimming winners and adding to losers
• Long-term returns — Some studies suggest rebalancing can add 0.5–1% annually

How Often

• Annual — Simple; do it on a fixed date (e.g., your birthday)
• Threshold-based — When any asset drifts 5% or more from target
• Contributions — Use new investments to buy underweight assets (avoids selling and taxes)

India Tax Note

Selling equity triggers capital gains tax. Use new SIPs or dividends to rebalance when possible to minimize tax.