It's crucial to stick with your mutual fund investments until you achieve your desired financial outcome. As you progress through different periods of life, your financial goals, risk tolerance, and investment horizon may vary. As a result, it's critical to periodically review your mutual fund portfolio to ensure that you're continuing in the right direction towards reaching your intended financial objectives.

Altering allocation across asset classes to maintain a proper and healthy mix of assets is known as portfolio rebalancing. Let’s understand how to rebalance your mid-cap fund portfolio to optimise returns.

When to Rebalance Your Portfolio

Establishing a rebalancing plan is good since it is a crucial component of long-term investing. Rebalancing is necessary to keep your portfolio on track with your investment objectives. Make sure you assess your portfolio's performance regularly (at least once a year) to see whether it can help you reach your objectives. 

Additionally, determine whether the portfolio needs to be rebalanced to fit with your unique asset allocation plan—from debt to equities or vice versa. Finally, avoid investing in too many mid-cap funds, as this might complicate the crucial process of evaluating and adjusting your portfolio. If you find portfolio review and rebalancing challenging, seek the assistance of a SEBI-registered financial advisor.

How to Rebalance the Portfolio

Here are a few tips to rebalance your portfolio in the most efficient way.

Limit the number of funds

What is the ideal number of mutual fund schemes in a portfolio? Not more than ten, roughly. Limiting strategies is crucial. With so many mid-cap funds, it's not simple. Divide your strategy into many groups. There will be one or two plans in each category for a total of ten funds. 

Diversification is key

Diversification simply refers to being exposed to various investment strategies and concepts that yield varying returns over time. You can invest in mid-cap funds that are focused on companies from different sectors.

Consider your risk appetite

Use a cautious approach while allocating your assets. Make a different portfolio for different financial targets like purchasing a home, retirement corpus etc..

Avoid complex products

Even if one takes an aggressive approach to investing, it is best to avoid closed-ended funds and complicated assets. The ease of investing or redeeming funds is also vital. It is essential to gain a thorough grasp of the redemption procedure and the product you are investing in. Having liquidity is crucial too.

Conclusion 

A portfolio review will assist you in effectively diversifying your investments. It will also help you reset your asset allocation within the parameters that are most appropriate for you given your age, cash flows, risk tolerance, and other factors. Proper asset allocation is the foundation of investing and a strategy unto itself. Invest in mid-cap funds on a good platform like the Axis MF app, which allows you to track your investments easily and help you rebalance your portfolio whenever required.