Rebalancing Your Portfolio

Sep 3, 2020 9:39:00 AM / by InvestorKeep



Your investment portfolio is not static. While “over” trading can lead to higher fees and lower returns, leaving everything in place for too long can leave you with more (or less) risk than you’d like and an improper alignment of your investments to your goals.

Market shifts can cause imbalances in your portfolio. The act of rebalancing refers to the buying and selling of assets in your portfolio to align your investments with your desired asset allocation. Your financial professional can help you decide on the allocation that is right for you and should rebalance your portfolio when necessary to bring it back into your agreed upon asset allocation model.

For example:

Stocks tend to vary more dramatically than bonds. Imagine a desired allocation model of 50% stocks and 50% bonds (this isn’t a recommendation, just an example). An uptick in the stock market could increase the amount of your portfolio invested in stocks (or even certain types of stocks). Now your allocation is over 50% in stocks and you haven’t changed a thing (but your risk level may have changed). In order to bring your portfolio into your desired allocation you might sell some of your stocks and reallocate the money proportionally back into bonds. 

Rebalancing should generally take place at least once a year (maybe more in an extremely volatile market). InvestorKeep will send you a rebalancing alert on a quarterly basis to ensure your portfolio is getting the attention it deserves.



Written by InvestorKeep

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