Investment Strategy: Rebalancing Your Portfolio

When it comes to achieving your long term investment goals, how does one successfully maintain his or her strategic portfolio allocation, while still making the appropriate adjustments as life goes along? Rebalancing.

Rebalancing your portfolio stands in stark contrast to selling or buying out of greed or fear based on an emotional reaction. Watch as Envision Wealth Planning President, Bob Bolen CFP®, explains this key aspect of managing life in motion:

Rebalancing portfolios is the occasional trading of your holdings to move them back to your previously determined allocation. By nature, positions will move up or down over time, both in absolute terms and relative to other holdings in the portfolio.

By opportunistically rebalancing, you sell a bit of the position that has risen, and buy more of the one that has declined, either in absolute terms or relative to other holdings.

This forces a systematic “buy low/sell high” strategy that is objective in nature. Rebalancing is a much better idea than reacting emotionally based on the market jirations of the day, selling or buying out of greed or fear.

Rebalancing helps you maintain your strategic allocation, thus, maintaining the risk appetite you are comfortable with. As well, studies have shown that rebalancing can add up to 1% per year, on average to portfolio returns.

Recent Posts