Portfolio rebalancing is the systematic practice of reviewing and adjusting the mix of assets held in a portfolio at regular intervals or when allocations drift materially from target weights due to differential returns across asset classes. It is both a risk management tool and a return-enhancing discipline—by trimming positions that have grown expensive and adding to those that have become cheaper, investors systematically buy low and sell high without requiring market timing ability. In India, mutual fund investors can automate a form of rebalancing through Systematic Transfer Plans (STPs), while direct equity and debt investors must manually monitor and adjust their allocations periodically.
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