I try to rebalance my portfolio once or twice a year based on market conditions, now I do it irrespective of the tax I have to pay whether its a Short Term or a Long Term tax because I know the tax will be less than the profit which we can gain in long term. 

![image.png](https://images.hive.blog/DQmNoyqgvm2G5VeupYA5XvQzrBPRp1jvFLovwDqpV5nTgm4/image.png)
PC: Pixabay.com

The thing is if you do not rebalance, and if the market decides to go down then you will be losing that gain which you have got. Now you may argue that what if the market goes up, yes it can happen but are you on track with your goal, if yes then it's better to secure the gains before wanting to have more gains. When you have the required corpus you need for your goal, then it's better to sit on gain and move the gains to the debt fund so that you have secured that corpus before wanting to have more.

The point is one should rebalance regardless of the current market condition as long as the rebalancing is suitable for our personal goals. Now you do not rebalance for the sake of rebalancing. The rebalancing should be done as per your asset allocation, say, for example, your intended asset allocation is 60% equity and 40% debt and if the equity allocation moves around 55% to 65%, it is ok not to rebalance. But if the equity has gone up to 70% or gone down to 50%, then either decrease the equity exposure and keep it to 60% or increase the equity exposure to keep it to 60% via rebalancing. 

Increasing the equity exposure is not required when you are nearing your goals, say for example you have only 5 years remaining for your goal then it's better to rebalance it and keep the equity exposure as less as possible. Now for the tax, the tax amount will be no more than 1 to 2 % of your annual investment for the goals and this amount can be paid to safeguard some of the equity gains.

Tax is just the peanuts we give it to the government, so saving tax on not doing rebalancing is not good at all. So it's better to rebalance with a clear objective of de-risking the portfolio.


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