Rebalancing is important
An investment portfolio is made up of funds that may invest across asset classes like equities, bonds, etc. The amount of your premium invested into each fund is set as per your financial goals and attitude to investment risk. Over the course of a year the funds in your portfolio may earn a different return resulting in a weighting change in your fund holdings. Rebalancing helps you to consolidate gains over a period of time and ensures your portfolio remains in line with your risk profile.
1 Your portfolio has a blend of 60% equities and 40% bonds based on your attitude to investment risk and return.
2 Equities perform well over a year, however your portfolio is out of balance with more fund value in equities. You switch to sell equity funds and buy more bonds.
3 The switch creates a balance and consolidates the gains in your policy and your portfolio returns to its target allocation.
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