Should MF investors rebalance portfolios? | Economic Times

ETMutualFunds.com asks mutual fund advisors and financial planners every week for a list of frequently asked queries by their clients. This week the Sensex fell around 3000 points, after touching the historic high of 50,0000. We spoke to Raj Talati, Founder, ABM Investment, a financial advisory firm, based in Vadodara, to understand what retail mutual fund investors should do at this point.Questions asked by investors:1. Will the market crash from here?2. What should I do to my existing portfolio. I had booked profits in December. Should I put them back or hold on?3. How should I do my tax saving in such a market?4. Should we change anything in our equity portfolio?Read more: If Sensex crashes from 50k, here’s what equity mutual fund investors should doHis response to his clients:Frankly no one knows how the market will behave even by the end of the day, then crash is undoubtedly impossible to predict. But present economic data doesn't show any chance of a crash in near future. But there are certain risks which are always associated with markets e.g. geopolitical, high inflation, political instability or a sudden event like pandemic. Obviously that risk can't be predicted.Like I said it is impossible to predict the market and if you booked profit in December, you very well know the way the market runs up after that. Many times you might be able to time the market once at the time of buying or selling or if lucky may be both the times, but it is impossible to do it on a continuous basis.To judge the market what you need is a long term view and a little bit of common sense. Where do you see the economy in 3 years or 5 years from now? If the answer is better and growing then go and take the opportunity of correction and invest and if it looks gloomy take an exit.For tax savings now hardly two months are left, ELSS are equity linked schemes so I am assuming you are investing at least for more than 5 years. So, 5-6% correction will hardly make any difference on your final returns, but to safeguard from any short term volatility and to have a sense of satisfaction that you did not invest at a market peak, you break it in 8 instalments and invest it every week to take advantage of averaging.Rebalancing your portfolio depends on a lot of factors. If you don't have any short term need, comfortable with 10-15% volatility, have comfortable liquidity for short to medium term, portfolio is well diversified, reviewed regularly or invested through mf then I don't see any reason to play with it. The best way to decide on it is asset allocation. If as per your decided allocation it requires to change, go for it.If the economy starts recovering, as it is expected from various reports, Sensex will rise further as P/E will automatically become attractive.