In this article, I want to touch upon the topic of exit strategies and the timely rebalancing of the portfolio as one approaches the financial goal.
This can be done through a thought-through glide path asset allocation, investing in something like a Target Date Fund or Balanced Advantage Fund in India to mitigate behavioral errors of staying invested in an expensive market. An investor, if confident, can do this on her own by allocating assets dynamically.
I was therefore able to pay the fees and had no anxiety with regards to the money commitment for the first-year semesters.
Of course, my advisor had planned this in advance, but this strategy helped me during the crisis period of Covid which nobody could have predicted.
Portfolio rebalancing is important, to protect the corpus that has been meticulously built over the years. However, the method followed for this may differ.
One may do this in a phased manner or can rebalance before a financial goal’s due date, like in my case, one year before the money was required. This will also depend upon the nature of the financial goal.
For example, for longer-term goals like retirement, this can be done by following a very popular strategy, known as the portfolio bucketing strategy.
This simply means dividing the accumulated retirement into different buckets ranging from cash and equivalent buckets to equity buckets, and use only a safer bucket for withdrawals …
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