Measure against what the client declared
Drift is the difference between a class’s share of the portfolio today and the share the client agreed to, in percentage points. Agreed 60% equity and holding 68% is a drift of plus eight points.
Measure it against the client’s own allocation, not a model portfolio. The point of a declared allocation is that the client chose it. A review that measures them against someone else’s model answers a question they did not ask.
Use a band, not a calendar
Rebalancing on a fixed date acts when nothing has moved and waits when a great deal has. A tolerance band acts on the drift itself: rebalance when a class is more than, say, five points from its share, and leave it alone otherwise.
A band also prevents small, costly trades. Moving a client back from 61% equity to 60% creates transactions, and possibly exit loads and tax, to correct a difference that does not matter.
Points, and rupees
Set the band in percentage points, and check the rupees too. Five points on a ₹20 lakh book is ₹1 lakh; on a ₹5 crore book it is ₹25 lakh.
A drift that is large in points can be small in rupees, and the other way round, so a minimum amount worth acting on keeps the list honest.
Rebalance with new money first
The cheapest way to rebalance is not to sell. Direct new money, a SIP or a lump sum, into whatever is below its share until the book is back inside the band. It takes longer, and it creates no capital gains and no exit loads.
When selling is needed, sell where it costs least: units past their exit load period, and holdings whose gains are smallest.
Drift is a conversation, not an instruction
A drift is a fact about the portfolio. Whether to act on it is the client’s decision, made with you. Some drift is deliberate: a client nearing a goal may be moving towards debt ahead of their declared share.
Record what was decided. Then the next review can tell the difference between drift nobody noticed and drift everybody agreed to.
Sahi Capital measures every client’s book each morning against the allocation and band that client declared, ranks what has drifted by points and by rupees, and records what was agreed.