Rebalance Your Portfolio as Goals Get Closer
🎯 Why Your Portfolio Should Change as Your Goals Get Closer
(And What Happens If It Doesn’t)
The further your goal, the more risk you can take. But as you get closer, you need to slow down, protect your progress, and maybe even change your route. That’s where asset allocation and rebalancing come in.
You know what’s funny? We plan holidays better than we plan our finances.
We’ll book flights, check weather, pack extra socks—but when it comes to our biggest life goals (kids’ education, retirement, dream home), we often just... invest and forget. No stops, no check-ins, no idea if the risk we took five years ago still makes sense today.
Honestly, I’ve seen this happen so many times in my offline practice that it almost feels like a pattern.
So, today, let’s talk about something that’s simple—but often ignored:
Why your investments shouldn’t look the same when you’re 10 years away from your goal… and when you’re 2 years away.
🚀 When the Goal Is Far Away: Risk Isn’t the Enemy
Let’s say you’re saving for your 3-year-old daughter’s college education—about 15 years away. At this stage, you need growth. Inflation is your main enemy, not volatility.
In fact, in this early phase, a little risk (in the form of equity exposure) is actually your friend. It gives your money time to grow and compound.
Think of it like driving on a highway—you’ve got clear roads, a full tank, and time on your side. You can afford to go a little faster.
🚦 Midway to Goal: Time to Slow Down a Bit
Now fast-forward to when she’s 12.
You’ve got 6–7 years left, and the corpus has grown well. But you’re not out of the woods yet. If a market crash happens now, it’ll hurt a lot more.
Here’s where a rebalancing act comes in.
You gradually reduce some equity exposure and move that portion to more stable, lower-risk assets like short-duration debt funds, balanced funds, or even hybrid categories. You’re not abandoning growth—you’re just dialing it down.
Think of it like shifting from 5th gear to 3rd. You're still moving, just more cautiously.
🛑 Closer to Goal: Now It’s About Protecting the Corpus
When you’re within 2–3 years of your goal, the name of the game is capital preservation. This is not the time to chase returns or hold on to 100% equity hoping for “just 2% more.”
I’ve seen this mistake cost people lakhs.
At this stage, consider moving your money into liquid funds, ultra-short funds, or bank-like low-risk options depending on your comfort level. Your investment should now behave more like an FD with better tax efficiency and liquidity.
It’s like reaching the last kilometer before your destination—you’ve slowed down, seatbelt’s on, and your eyes are fully on the road.
“You don’t win the game by scoring the most runs in the first over. You win by pacing the innings—and finishing well.”
🤹 Why Rebalancing Matters
Let me put it simply:
Markets don’t care about your goal dates.
They’ll rise and fall regardless of when your SIP started. That’s why you need to periodically shift your allocations based on your timelines—not the market’s mood.
Rebalancing does two things:
- Locks gains when equity markets have performed well.
- Realigns risk so that your portfolio always matches your goal's stage.
Ideally, review annually—or during big market swings.
❓ FAQ Time: Real Questions from Real People
Q: What if I rebalance too early and miss out on equity returns?
A: You’re not exiting completely—you’re gradually reallocating. It’s about balance, not panic.
Q: Do I need a financial professional to do this?
A: Not necessarily—but it helps. Even pilots need ground control. A professional can help avoid emotional decisions.
Q: Isn’t it enough to just do SIP and stay put?
A: SIP is a great start. But without periodic review, it’s like planting a tree and forgetting to water it.
🌱 Final Thought
Let’s be real—money is emotional. When goals get closer, emotions run high. The best way to protect both your heart and your portfolio?
Make your investments age with you.
So, here's a gentle nudge:
When was the last time you looked at how far—or close—you are to your goals?
And more importantly, is your portfolio still driving at the right speed?
If this sparked a thought, maybe it’s time we had a real conversation—offline, of course.
Comments
Post a Comment