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With markets on edge, is it time to rebalance portfolio: Expert view
Short-term investors and those who don't want risks should consider rebalancing sooner, says Rajiv Sharma
Global markets have gone up and down as investors try to make sense of trade tensions, regional conflicts, and monetary policies. Many investors are asking if it's time to pause, review financial goals and lock in gains before things get more volatile. Rajiv Sharma, partner at Singhania & Co, offers his perspective.
Market Environment
'Geopolitical events viz., ongoing tariff war, de-dollarisation efforts by Asian region, unending Ukraine-Russia war, Middle East conflicts and war-like situation between India and Pakistan are the primary drivers negatively affecting the current state of the equity market,' said Sharma. He noted that headline risks have pushed volatility to levels where even seasoned investors are rethinking their allocations.
When to consider rebalancing
Timing, Sharma insists, is personal: 'Short-term investors, or those with low-risk appetite, should consider rebalancing sooner, potentially shifting a portion of equity holdings into more stable assets like bonds, especially during periods of heightened volatility.' He cautions against waiting for a perfect bottom, arguing that a proactive shift can preserve capital and reduce the emotional toll of sudden market swings.
Indicators to watch
Rather than relying solely on quarterly reports, Sharma tracks market sentiment closely:
'Market is driven by sentiments which are formed due to various reasons. Currently there are enough factors for formation of negative sentiments. So, sooner rebalancing is better particularly those who have weak risk tolerance.'
He also watches technical signals, such as extreme readings in the VIX or credit-spread widening, as triggers for incremental adjustments.
Balancing Costs and Tax Impacts
On execution costs, Sharma is blunt: 'Transaction costs are minuscule while rebalancing and securing risk and should not be a factor for rebalancing — portfolio particularly in such a turbulent market as is now.' As for taxes, he points out that in a down-market scenario, capital gains are often minimal, so 'capital gain tax in most cases will not be a factor to consider in crashing market when investor hardly had any gains to be taxed.'
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