In Equity or equity MF, it is generally recommended to have a pretty long term horizon (+10 years) to get the actual benefit of compounding. Does that mean that you just invest once and forget till the next decade? The answer is absolute No!
Every financial asset classes need monitoring and rebalancing at a certain frequency, whether it is equity, debt, or gold. It is also recommended to have a negatively correlated asset class in your portfolio so that you can book partial profit from one asset class that has performed and shift that profit to the underperformed asset class. The moto here is to book profit at fixed intervals from one asset to get it average the other one.
Although this process is simple but not easy and 90% of people fail to do it on regular basis. This requires a system, process, monitoring, awareness, discipline, and decision ability without being emotionally involved or under the influence of the market or that particular asset class. Certain;y, you need the help of an expert or professional advisor to do so for you.
However, while rebalancing you should also look at the stock/MF scheme whether there are any fundamental changes that happened which lead to underperformance of the same. It may be because of :
- change in the objective/mandate of the scheme
- change in fund manager
- change in SEBI guideline
- change in the company / AMC management
- change in fundamental attributes
- increase in the size of AUM beyond the comfort level
- change in your risk profiling
- change in your financial goal
- change in tax laws or compliance issue
Despite having a long-term approach, it is equally crucial to monitor your investment portfolio.
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