My Asset Allocation & Rebalancing

sakthipriyan.com/building-wealth

## My Asset Allocation & Rebalancing

#### What is my asset allocation and How do I manage it?
#### Dec 06, 2025
 
 
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### Disclaimer
|                    |                                                             |
|--------------------|-------------------------------------------------------------|
| **Personal Fit**   | Based on my experience & comfort.                     |
| **Purpose**        | Educational — not financial advice.                    |
| **Risk**           | Markets involve capital risk.                    |
| **Rules**          | Verify tax/regulatory details.                        |
| **Responsibility** | Make decisions aligned with your goals.                     |

### Contents
 
<ol class="fragment grow">
 <li>⚖️ What is Asset Allocation?</li>
 <li>🎯 My Asset Allocation</li>
 <li>🔄 Rebalancing</li>
 <li>🛠️ How I manage Rebalancing?</li>
 <li>📝 Summary</li>
</ol>

---

### 1️⃣ What is Asset Allocation? ⚖️

> 📊 Asset allocation is how you **divide your portfolio** across different asset types 
> based on your **time horizon** and **risk comfort** —  
> such as **Equity (India, US)**, **Debt** and **Gold**.

🍲 It is the **portfolio’s recipe**. The mix determines,

- ⚖️ Risk level & Return potential  
- 🌊 Volatility  
- 🚀 Smooth compounding

---

### 2️⃣ My Asset Allocation
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### 2️⃣ My Asset Allocation / Why?
- Strong long-term equity focus (80%)  
- Diversified across asset classes, geography/currency & market cap  
- Equity Exposure via index funds only  
- 20% Non-equity provides drawdown protection and dry powder  
- 6 target buckets to manage and rebalance  
- Simple to maintain yet optimized for compounding  
 
---
### 3️⃣ Rebalancing 🔄 
| | |
|--------------------|------------------------------------------------------------------------|
| **What** | Adjusting your portfolio periodically to maintain your target asset allocation. |
| **Why** | Prevents overweighting in high-performing assets. Maintains desired risk profile. |
| **When** | Time-based (e.g. annually) or Threshold-based (e.g drifts beyond 5%). |
| **How** | Sell overweight assets & Buy underweight assets. |
| **Taxation** | Consider tax implications and cost-effective strategies. |

---

### 4️⃣ How I Manage Rebalancing? 🛠️

> 💡 I use monthly **Cash-Flow** to do **Threshold based** rebalancing.

What does it mean?

- If an asset is above its target → I stop buying it.
- I invest new money only into underweight assets.
- The split is proportional to how underweight each asset is.

--

### 4️⃣ How I Manage Rebalancing? 🛠️
Steps to allocate monthly investment
1. Calculate deviation (Target ₹ – Current ₹) for each asset
2. Exclude anything that is negative
3. Allocate new money based on these deviation ratios

> 💡 This fixes imbalance without selling.

--

### 4️⃣ Rebalancing Example
Current Portfolio: ₹ 5,00,000 - Monthly Inflow: ₹ 20,000

|Asset|Current|Target| ₹ Current | ₹  Target |
|-|-|-|-:|-:|
|Nifty 50	| 39.00%| 40.00% | 1,95,000 | 2,08,000 |
|Nasdaq 100	| 39.90%| 40.00% | 1,99,500 | 2,08,000 |
|Debt	|  10.50%| 10.00% | 52,500 | 52,000 |
|Gold	| 10.60%| 10.00% | 53,000 | 52,000 |
|Total | 100.00% | 100.00% | 5,00,000 | 5,20,000 |

Target Total is ₹ 5,20,000 after this month’s ₹ 20,000 investment.

--

### 4️⃣ Rebalancing Example
Current Portfolio: ₹ 5,00,000 - Monthly Inflow: ₹ 20,000

|Asset| ₹ Current | ₹  Target | ₹ Diff | ₹ Adjusted|
|-|-:|-:|-:|-:|
|Nifty 50	| 1,95,000 | 2,08,000 | 13,000 | 12,000 |
|Nasdaq 100	| 1,99,500 | 2,08,000 | 8,500 | 8,000 |
|Debt	 | 52,500 | 52,000 |  |  |
|Gold	| 53,000 | 52,000 |  |  |
|Total | 100.00% | 100.00% | 21,500 | 20,000 |

₹ Diff = ₹ Target – ₹ Current. ₹ Adjusted = Apply ₹ Diff ratio and round off

--

### 4️⃣ Rebalancing Example
Comparing Dynamic monthly purchase vs Static SIP

|Asset| ₹ Current | ₹  Target | ₹ Dynamic| ₹ Static |
|-|-:|-:|-:|-:|
|Nifty 50	| 1,95,000 | 2,08,000 | 12,000 | 8,000 |
|Nasdaq 100	| 1,99,500 | 2,08,000 | 8,000 | 8,000 |
|Debt	 | 52,500 | 52,000 |  | 2,000 | 
|Gold	| 53,000 | 52,000 |  | 2,000 |
|Total | 100.00% | 100.00% | 20,000 | 20,000 |

Static SIP = Fixed investment into each asset

### 4️⃣ Why This Works Well ⭐

- No selling → No taxes  
- Automatically maintains target allocation  
- Emotion-free & rules-based  
- Buys low, avoids buying high  
- Best suited for the accumulation stage  
 
---

### 5️⃣ Summary 📝

- Allocation: 80% Equity / 20% Non-Equity  
- Diversified across India, US, Debt and Gold 
- Rebalancing uses cash-flow + deviation ratios  
- Zero selling unless absolutely necessary  
- Clean, mathematically precise, tax-efficient strategy  
 
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