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What is Portfolio rebalancing, when to do it, how to do it — complete Hindi guide for Indian investors.
Published by The Retail Trader · AUG 13, 2026 · Features
What is Portfolio rebalancing, when to do it, how to do it — complete Hindi guide for Indian investors.
Portfolio rebalancing means bringing your portfolio back to its original target allocation. Allocation gets worse over time — rebalancing fixes that.
Simple definition: > Rebalancing = Portfolio's "reset button." If the target was 60% equity and equity increased to 75% → sell equity and shift to debt so that it comes back to 60%.
Starting allocation: 60% Equity, 30% Debt, 10% Gold
After 1 year (equity rally):
• Equity: 75% (highly increased)
• Debt: 20% (proportionally less)
• Gold: 5%
Problem: Equity 75% = portfolio has become very risky. If equity falls then huge loss.
Solution: Rebalance → Sell Equity and shift to debt/gold → Back to 60/30/10.
Method 1: Calendar Rebalancing:
• Frequency: Quarterly or annually
• What to do: Check allocation every quarter/year, adjust
• Best for: Simple, easy to follow
Method 2: Threshold Rebalancing:
• Trigger: When allocation deviates 5%+
• What to do: Rebalance when threshold is crossed
• Best for: More responsive, fewer transactions
Method 3: Cash Flow Rebalancing:
• Trigger: While investing new money
• What to do: Put new money into under-allocated assets
• Best for: SIP investors, no selling required
Step 1: Check Current Allocation:
• What is the % of Equity?
• What is the % of Debt?
• What is the % of Gold?
• What % is cash?
Step 2: Compare with Target Allocation:
• Equity — Target: 60%, Current: 75%, Difference: +15%
• Debt — Target: 30%, Current: 20%, Difference: -10%
• Gold — Target: 10%, Current: 5%, Difference: -5%
Step 3: Rebalance:
• Sell Equity: 15% shift to debt/gold
• Buy Debt: 10% add
• Buy Gold: 5% add
Step 4: Verify:
• Check new allocation matches target
• Consider transaction costs
• Look at tax implications
Keep these five points in mind:
• Monthly — Pros: Very responsive, Cons: Too many transactions, high costs
• Quarterly — Pros: Good balance, Cons: Moderate transactions
• Half-yearly — Pros: Less transactions, Cons: May miss big moves
• Yearly — Pros: Simple, low cost, Cons: May be too late
• Threshold (5%) — Pros: Responsive, Cons: Requires monitoring
Recommendation: Yearly rebalancing + threshold trigger (5% deviation).
Keep these five points in mind:
• Brokerage — ₹20 per order
• STT — 0.1% on equity sell
• Capital gains tax — STCG 20% or LTCG 12.5%
• Exit load — Mutual funds (0-1%)
• Stamp duty — Minimal
Tip: Cash flow rebalancing (new money) avoids selling costs.
"Equity is rising, why sell?" — Over-concentration risk. Huge loss in a crash.
Every month rebalance = unnecessary costs. Yearly or threshold-based is enough.
STCG of 20% is applicable on selling equity. Do tax-efficient rebalancing (with new money).
“It is a bull market, do not sell equity” — maintain discipline. Rebalance according to the plan.
Method 1: Rebalance with New Money:
• New money put into under-allocated asset
• no need to sell anything
• Zero tax impact
Method 2: Loss Harvesting:
• Sell loss making stocks (tax loss harvesting)
• hold profitable stocks
• offset capital gains from losses
Method 3: LTCG Exemption Utilize:
• ₹1.25L LTCG is tax-free
• Book profits up to ₹1.25L every year (tax-free)
• Reinvest in under-allocated asset
Keep these points in mind:
• 📌 PORTFOLIO REBALANCING QUICK REFERENCE
• WHAT IS IT:
• 📊 Bringing the portfolio back to target allocation
• 📊 Risk control and discipline tool
• 📊 Saats allocation of time gets spoiled
• METHODS:
• 📊 Calendar — Quarterly/yearly fixed
• 📊 Threshold — trigger at 5% deviation
• 📊 Cash flow — rebalance from new money
• PROCESS:
• 1️⃣ Check current allocation
• 2️⃣ Compare with Target
• 3️⃣ Sell Over-allocated asset
• 4️⃣ Buy Under-allocated asset
• 5️⃣ Verify new allocation
• FREQUENCY:
• 📊 Yearly + 5% threshold trigger
• 📊 SIP investors: Cash flow rebalancing
• COSTS:
• 📊 Brokerage: ₹20/order
• 📊 STT: 0.1% (equity sell)
• 📊 Tax: STCG 20% / LTCG 12.5%
• 📊 Exit load: 0-1% on MF
• TAX-EFFICIENT:
• ✅ Rebalance with New money (no selling)
• ✅ Loss harvesting (offset gains)
• ✅ LTCG exemption utilize (₹1.25L/year)
• AVOID:
• ❌ Never rebalancing (concentration risk)
• ❌ Too frequent (unnecessary costs)
• ❌ Ignoring tax implications
• ❌ Emotional decisions
Keep these four points in mind:
• Portfolio Diversification Guide
• What Is Risk Management?
• What Is a Mutual Fund?
• Capital Gains Tax India
The Retail Trader — educational market analysis. Not investment advice.
This article is for educational purposes only. It is not a buy or sell recommendation, a claim of guaranteed returns, or advisory guidance. Exchanges, SEBI and RBI change rules, rates and procedures from time to time, so verify every figure with your broker or an official source.