Review Your Portfolio And Rebalance To The Desired Mix

#365 Days Of Financial Capability – Day 7

Reviewing your investment portfolio is one of the most crucial steps in managing your money.

If you are investing properly, you should have investments across different asset classes – stocks, bonds, real estate etc.

When you built the portfolio initially you might have wanted to have only 40% in stocks and the rest in bonds. With the big movements in the market last year, that ratio may have changed. If left unchecked, your investment mix can continue to deviate from what you intend to do with them.

At the start of a new year, you want to do two things:

+ Review that asset allocation to make sure it is still desirable/required.

+ Rebalance your portfolio with the desired/required asset allocation.

To rebalance you either sell those that have gained a lot or buy those that haven’t done so well.

Why should you sell your winners & buy laggards?

+ Lock-in your profit.

+ Improve your holding cost.

Markets tend to revert back to mean levels, so sometimes, if you don’t rebalance, the market will do it for you i.e. if the price of the winners drop.

Rebalancing your portfolio allows you to maintain a desired asset allocation over time, which is essential for balancing the risk you’re taking with the long-term return potential of your investments.

About Thrive Financial Advisors

We are a financial education company with the mission to spread the message of financial capability – the knowledge, confidence, and opportunity to act on financial matters.

Ready to develop your financial capability and become #Fintelligent?

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