Portfolio Rebalancing Strategies: 'Do You Know This Secret?'

Why Advisor need portfolio rebalancing?

Portfolio Rebalancing is a Game Changer idea for Financial advisors, you can call it “PRODUCT ENGEERING”, a mutual fund scheme gives same returns whether investor invest with Advisor A or Advisor B. Now the question is what extra a Advisor can do for his clients?

Problem: 50% portfolio loss vanish 100% portfolio gain.

 

Rule No.1: Never lose money. Rule No.2: Never forget rule No.1. - Warren Buffett

The major Market corrections are cyclical keep repeating in 3-4 years, every time the market corrects shapely it take portfolio in the position of 3-4 years back, all the gain disappear which was accumulated in the bull run, now the question is how to save this gain.

Solution:

 

100% Equity Vs. Yearly rebalanced 70/30 Equity-debt

(Invested in Sensex for equity and invested in Glit fund for debt)

Really, Portfolio Rebalancing Optimize Return and Reduce risk? But how?

1. Between the market rally from 2005 to 2007 the 100% Equity portfolio gave better returns but in market fall it went below the 70/30 portfolio.

2. During the 15 years the rebalanced portfolio were less volatile, after 3^rd year the rebalanced portfolio never went below the 100% equity portfolio.

3. Every time the equity gained, it shift some profit to debt and when equity fall, it buy units at cheaper rates.

Which Should be the right asset class mix for best returns?

Equity & Debt mix is depend on the risk profile of the investor but still if the question is what asset mix can give optimized returns, here we did back testing, the case is same as above example the last 15 years returns of Sensex and gilt, rebalanced yearly.

Below graphs shows that the returns from sensex and gilt fund (Asset mix in lower equity(0%/100%) to high equity mix(100%/0%) in past 15 calendar years and the value of Rs.100000 invested on 1 jan 2005 and redemption done on 30 April 2020.

 

Looking at the above back testing results, the most optimized returns got in 70/30 Equity/debt, the value of Rs.100000 has been reached to Rs.551864, but if advisor want to reduce more risk with little compromise with returns, opt for 60/40 asset mix.

Always Remember, Investor loves stability!

What are the Strategies you can follow?

Periodic Rebalancing

The most convenient way to rebalance a portfolio is to decide a time interval for example quarterly, Half Yearly or Yearly. Most of the advisor prefers a yearly rebalancing irrespective of market condition, in all the above examples the yearly rebalancing has been done.

 

Range Rebalancing

Advisor can set a target percent change in the portfolio for example a portfolio is set as equity/debt 60/40, when the market rise the equity portion will increase and the ratio get changed, it may be 70/30, here advisor can set a alert on 10% change, so whenever the portfolio get change of 10% it will ask to rebalance it.

How easy it is to rebalance the portfolio?

Step 1: Decide Asset Allocation ratio and Re-balancing Strategy out of Fixed interval and change percent.

Step 2:

Once advisor decided the equity/Debt ratio with investor and what strategies they are going to follow, after that all task has been handled by software, if advisor want to rebalance the portfolio on 5% change, the software will send a alert as the difference in the current and recommended touches 5%.

Step 3:

Software will itself generate the Buy/Sell amount, you need to go to sell option and enter the amount you want to switch to other asset class, after that all you need to click on RE-BALANCE NOW Button. The switch order will be placed on BSE/NSE.

 For more information, visit @- https://wealthelite.in/

What role does Mutual Fund Software play in advisors Business?

Getting back to some years one can easily understand the issues and challenges an advisors had to face while dealing operations in market of investments. The business was dependent upon the manual records and paper based information and loss of any important documents directly impacts upon the business. But after the introduction of Mutual Fund Software in the market the reality for advisors has been changed as the new emerging technology have made it easy for the advisors to handle complex task and operations of business. Even the major actions to be brought for profit of business are just a click away with the advisors.

Special perks to advisors due to software:

· Paperless record of important information of clients.

· Conversion of difficult and challenging task into convenient process.

· Bulk management of users and advisors of the business.

· Quick interaction platform for advisors and investors.

· Systematic financial planning for client’s portfolio.

Key Features:

· Data Management: The software manages the data of clients on behalf of advisor which reduces the operational cost for advisors and thus helps in securing more revenue for the business.

· Financial Calculators: The advanced financial calculators assist advisors in performing complex calculations of returns for the future that can be achieved through present investment.

· Act as personal Assistant: The software is personal assistant of advisors which perform advance operations in the benefit of business and ensures growth of the business at reasonable cost.

· Portfolio Manager: The advisor can free of worries when the software is taking care of client’s portfolio and ensures that every invested fund should reach to the desired point that helps in securing maximum gain.

The advisors still based on traditional method of business management are on the verge of closure because staying rigid to the same technology makes the whole business obsolete and cannot generate anything rather than loss for the business. Thus, it is better for advisors to stay being adaptive towards latest techniques in order to secure the major position in the industry. For more information, visit @- https://www.redvisiontech.com/

 

How without mutual fund software for IFA business growth cannot be monitored?

Profit and loss evaluation and portfolio’s valuation would not be possible due to lack of Mutual fund software for IFA as a result of which the determination of business growth would be typical for the advisors along with delivering productive service. For more information, visit @- https://www.redvisiontech.com/

Why Mutual fund software in India is becoming popular platform for investment?

The investor and advisors are likely to attract with the tool that mitigates their work operations and deliver optimum results in less time. Likewise, the Mutual fund software in India is performing all operations in interest of advisors and investors to make the dealings more convenient. For more information, visit @- https://www.redvisiontech.com/

Whether Mutual fund software for distributors enhancing customers for advisors?

Along with handling existing customer the advisors are able to attract new clients due to which advisors productivity is increasing significantly. The Mutual fund software for distributors is setting a new benchmark in the investment sector and contributing in success of advisors. For more information, visit @- https://www.redvisiontech.com/

How Mutual fund software for IFA helps to grow business of advisor?

The advisors can differentiate between the clients having investment in SIP, ELSS, and FMP with the help of Mutual fund software for IFA and based on which they can induce clients to make investment in other segments for better returns which ultimately grows advisors business. For more information, visit @- https://www.redvisiontech.com/

How Mutual fund software in India is generating wealth in the economy?

Due to the large number of transactions and instant investment or withdrawals there is continuous circulation of money in the economy through Mutual fund software in India which is also boosting the economic progress of the nation. For more information, visit @- https://www.redvisiontech.com/