What is tracking and rebalancing?
Tracking is ensuring that the plan is in the right direction. Ideally, you should review your investment plan once in a month. It is unnecessary to daily check the portfolio if you diligently follow a plan. The media is either euphoric or depressed (They are in the business of making you excited not in the business of making you rich), so an investor could become negative or elated by short-term moves and ignore the long-term growth. Rebalancing refers to correcting the portfolio if it is out of balance thanks to rising or falling prices of investments. Rebalancing is how you maintain the portfolio balance. For example if your original AAP was 40% equity and 60% debt and after a year due to market movements it becomes 35% equity and 65% debt, then in order to maintain the original AAP you need to sell 5% from debt investments and buy equity investments. This ensures you follow the basic rule of investing, which is buy low and sell high.
