Returns from any asset class come with a certain degree of risk. Investors want to minimise risk to get better returns. But different assets perform differently under different economic environments. For example, when inflation is high, gold tends to deliver better returns than stocks. This is where investors use dynamic asset allocation and rebalancing within their investment portfolio. It helps them to take advantage of better-performing assets. At the same time, it also reduces their risk exposure. What is Dynamic Asset Allocation and Rebalancing? Dynamic asset allocation is an investing strategy where allocation of money to different assets is done as per changing market conditions. Asset allocation is based on factors like market valuations and risk conditions. For example, if valuations are attractive, exposure to stocks can go high, but if risk increases, this exposure can be reduced and shifted towards debt instruments like government bonds. Rebalancing simply means bringing th...
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