Almost everyone agrees that rebalancing your portfolio is one of the keys to having a successful investment outcome. We know that your asset allocation determines how your portfolio will perform. Successful investors spend a lot of time determining what they want to include in their portfolios, and how they want to spread out their assets. Once you put your portfolio into practice, the markets have ideas of their own. The market is going to drag your beautifully designed portfolio through every mud puddle it can possibly find. It’s your job to pick your portfolio up, dust it off, and point it back in the right direction. This is where rebalancing comes into play. Rebalancing brings your portfolio back into line, and ensures that you are (roughly) taking the right amount of risk through time. There are other benefits to rebalancing that people talk about – most notably that it systematically forces you to buy low and sell high – but keeping your portfolio dialed in on your appropriate level of risk is the big one. If you don’t periodically bring your portfolio back into alignment, then all the time you spent lovingly crafting your asset allocation will be wasted. Pretty […]


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