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As markets reach new highs, investors’ portfolios may be tilted toward stocks. But managing volatility and avoiding losses requires a balance, investment advisers say.
“I think rebalancing asset allocation really does a lot in making sure that the behavioral aspects of investors are taken into account and providing the discipline for investors to follow through on the course,” says Managing Director. Director Kirtan Shah said. Credence Family Office Pvt. told NDTV Profit.
Another reason why portfolios become distorted is because assets underperform. This occurs when an investor concentrates on his one asset, such as stocks, or on one sector.
When balancing a portfolio, Kirtan said the first thing to do is balance the allocation and then balance the market capitalization.
As investors get closer to their goals, they should start allocating that money to bonds because they don’t want to find themselves in a situation where they’re getting close to their goals and the stock prices fluctuate, which ends up causing them to fluctuate. ‘You’re not going to get the money you really need,’ he said.
Arnav Pandya, Founder, Moneyeduschool says, “Capital losses that may arise from reallocation within the portfolio should also be utilized effectively, as they offset some other gains that may occur today or next year. Because it can be used for the future. “
Regarding crypto allocation, Pandya said that you need a good reason to invest in cryptocurrencies and that he personally does not recommend including them in your portfolio.
Shah agreed, advising retail investors to avoid investing in things they don’t understand.
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