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After several years of strong equity markets, I suspect many of you are
likely sitting on portfolios that look very different from what you
intended. A sensible 60:40 split between equity and debt five or six years
ago may have pushed you closer to 75:25 or even 80:20. Your portfolio
changed without you changing anything. This silent drift is exactly why our
cover story focuses on rebalancing, a topic that rarely receives the
attention it deserves. The strange thing about rebalancing is that almost
every investor understands the logic. Restore your original allocation.
Sell what has risen. Buy what hasn’t. Lock in gains. Maintain your risk
level. Simple in theory. And yet, when the moment arrives to actually do
it, something feels deeply wrong. Consider what rebalancing asks of you
right now. It asks you to sell some of your equity holdings, the very
investments that have made you feel like a smart investor, and move that
money into debt funds, which feel dull by comparison. Every instinct
rebels. Why sell winners? Why shift money from what is working to what
isn’t? The answer, of course, is that you are not predicting the future;
you are managing risk. Knowing this is one thing, feeling it is another.
This is the central challenge of rebalancing. It requires you to act
against the grain of your own psychology. When equity markets are soaring,
rebalancing feels like leaving money on the table. When they’re crashing,
it feels like catching a falling knife. There is no comfortable time to
rebalance. The right moment always feels like the wrong moment. I’ve been
writing about investing for three decades now, and I’ve observed that this
psychological barrier is far more significant than any technical
complexity. Investors will spend hours researching fund managers, comparing
expense ratios, and debating large-cap versus flexicap—activities that have
a marginal impact on long-term outcomes. But they will avoid the 10-minute
task of checking whether their portfolio has drifted from its target
allocation, because confronting that drift means confronting an
uncomfortable decision. The financial services industry only makes it
harder. There’s no commission in telling someone to sell a well-performing
fund and buy a boring debt fund. No headlines are written about investors
who maintain their asset allocation through market cycles. The incentives
all point toward action, toward new funds, toward the next opportunity.
Rebalancing is the opposite of exciting, which is precisely why it works.
What makes this moment particularly important is the extent of the
accumulated drift. The equity rally of recent years has been substantial
enough that even disciplined investors may find their portfolios carrying
significantly more risk than they intended. This isn’t a problem when
markets continue rising. It becomes a serious problem when they don’t. The
investor who thinks they have a moderate-risk portfolio but is actually
running an aggressive one will discover this mismatch at the worst possible
time, during the next significant correction. Our cover story lays out the
mechanics and the evidence. Twenty years of data across eight market cycles
make a compelling case. But the mechanics were never the hard part. The
hard part is bringing yourself to act on what you know. It means selling
something that has made you money to buy something that hasn’t. It means
trusting a process over a feeling. The best investment decisions often feel
wrong at the moment. That discomfort isn’t a sign that you’re making a
mistake. It’s usually a sign that you’re doing exactly wh

There’s a peculiar obsession in the investment world with finding the
perfect fund. Browse any financial forum, and you’ll see endless debates
over the highest returns, lowest volatility, or smartest strategy. As if
identifying the mathematically optimal choice guarantees success. It’s an
understandable mindset, but it misses the most crucial element of long-term
wealth creation: staying invested. This month’s cover story tackles a
question that seems almost heretical in our returns-obsessed culture: What
if the best starter fund isn’t the one with the best track record? What if,
for new investors, the optimal choice is actually suboptimal? The answer
lies in understanding that investing is as much a psychological exercise as
it is a financial one. The human brain isn’t wired for the market’s rhythm.
We’re programmed to flee danger, and a portfolio dropping 15 per cent feels
exactly that. This isn’t a character flaw; it’s evolution. Our ancestors
who panicked at the first sign of trouble lived to see another day. But in
investing, this same instinct becomes destructive. The biggest enemy of
compounding isn’t volatility; it’s the investor who quits too soon.
Consider the typical journey of a new equity investor. They begin with
enthusiasm, armed with stories of market legends and compounding charts.
Then comes their first serious correction. Suddenly, logic collides with
panic as they watch months of SIPs vanish. That first scar is hard to heal.
Many never recover. This is why the question of starter funds matters more
than most realise. It’s not about chasing the highest returns over the next
decade. It’s about choosing an investment that lets a newcomer experience
market cycles without developing a fear of equity investing. Think of it as
inoculation, a vaccine, rather than optimisation. This is where balanced
advantage funds, despite moderate returns, make sense as training wheels
for equity investing. They don’t eliminate volatility; that would defeat
the point. But they soften the blows just enough to make corrections
educational, not traumatic. A 6 per cent decline instead of 15 per cent can
teach the same lesson, minus the panic that derails long-term investors
from equity investing permanently. The beauty of this approach becomes
apparent over time. An investor who starts with a moderate fund and
gradually moves towards pure equity has experienced the full emotional
spectrum of market participation. Compare this with the investor who begins
with aggressive equity exposure. If they’re lucky enough to start during a
bull market, they might develop unrealistic expectations about investment
returns. If they’re unlucky enough to start during a correction, they might
abandon equity investing altogether. Either outcome results in a poor
long-term outcome. The lesson extends beyond fund selection. In a world
obsessed with optimisation, we often forget that the best solution isn’t
always the one that looks best on paper. Sometimes, the most effective
approach is the one that accounts for human nature rather than fighting
against it. The investment industry does a disservice when it presents
complex strategies to newcomers without first ensuring they have the
emotional foundation to implement them successfully. It’s like teaching
advanced calculus to someone who hasn’t mastered basic arithmetic. The
knowledge might be valuable, but it’s premature. What matters most for new
investors isn’t finding the perfect fund; it’s finding the fund that helps
them become perfect investors. The perfect start, it turns out, is
perfectly imperfect.

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