InvestorQ : How important is exit when you reallocate your portfolio?
Suhani Mirza made post

How important is exit when you reallocate your portfolio?

ishika Banerjee answered.
3 years ago

Back in 2005, when the markets had crossed their previous 2000 highs, an investor wanted to exit equities altogether. His justification was that a new high cannot be sustained. Back then the Sensex was at 6400. I only wonder what he eventually did, because the Sensex is almost 6 times that level today. Don’t just reallocate because a previous high has been touched. That is why your exit has to be planned a lot more meticulously.

This case is not a case in isolation. Many investors take these important decisions without adequate logic, justification, reasoning and forethought. While in many cases, re-allocation can be a personal decision, a well chalked out re-allocation strategy can go a long way in reducing pain as in the above case. Here are a few basic pointers on how to design a re-allocation strategy. Check them out for your own benefit.

Asset re-allocation cannot be a routine activity. It has to have a set of pre-determined triggers for implementation. You need to realize that your best thought-out strategies can become obsolete with the passage of time. You must also be dispassionate enough to let go of your strategies or stocks that have served you well for a long time. That is the core of asset re-allocation. It has to be done dispassionately and analytically but not necessarily mechanically.