Rebalancing Mutual Fund Can be Tiring

The problem with a lot of people is that they tend to buy Mutual Fund by seeing the past performance and because of that their portfolio gets cluttered with lot of funds and thus at one point if tike managing it is a problem.

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Let me tell you my story, I have been investing in the mutual fund for last 6 years and at one point of time I had 20 funds which is huge. This is mainly, I was like other people who tend to buy Mutual fund based on someone's suggestion or by looking at the past performance. And because of that I was not getting a very good returns which I hoped for. But I spent time on my portfolio and eeduce it to 12 as of now and will target to reduce it further to 8.

Now it took me around 1-2 years for doing this because I did not wanted to pay exit load or I do not wanted to pay long or short term taxes. And this was the process gets dragged. Now thing of people who have 25 funds or more, for them doing this activity is much more worse. Now my target is to get most of my Mutual fund in the passive funds and keep 2-3 in active funds mainly the small cap and large cap. In this way the overall it will be a balanced one.

And this makes the rebalancing tiring because when a person sees so many funds in his her portfolio, it takes time and energy. And that's why rebalancing should be done every now and then. Rebalancing concept is mainly moving the funds from debt to equity or vice versa. But rebalancing also means removing the clutter from your portfolio. In that way you will have less funds to manage and get good returns.

One of the main reason people are moving towards the passive funds is because, it requires less maintainance and less rebalancing and thus their portfolio will grow accordingly.