There are two parameters where profit-booking and rebalancing can be done, according to Rushabh Desai, founder of Rupee With Rushabh. If the small and mid-cap segment have significantly increased beyond initial allocation, one can consider rebalancing; and if a financial goal is approaching within the next six months to a year, it may be advisable to rebalance, he said.
Rebalancing should not be done very frequently in the short term, advised Desai. Portfolio strategies on profit-booking and rebalancing are subject to taxation, and it’s not advisable frequently and in the short-term, according to him.
“If portfolio rebalancing is skewed towards small and mid caps, then stay invested if you have a long-time horizon. The SMIDs are very important for wealth creation,” Desai said.