Investment Portfolio Rebalancing: Passive vs. Active
One of the most important parts of investing your money for long-term goals such as retirement is to make sure you are rebalancing your portfolio often. This is so they are on track and you are not taking on too much risk or too little risk with your investments.
So let’s look at an example of how that might work:
What Might Not Belong in Your Portfolio
I've written extensively on what goes into a portfolio: a diversified mix of asset classes that fit your risk tolerance and risk capacity, perhaps tilted towards factors of increased returns. Sometimes, though, it makes sense to talk about what might not belong in your portfolio.
Should I Consolidate My Investment Accounts?
by Brian Berkenhoff, Birch Investment Management
Would you like more free time? This non-financial reason may be the most important. If your investment accounts are spread about - think of all the mail, emails, passwords, and documents you have to keep track of. As a financial advisor, I've invested heavily in software that keeps track of my investments. The average investor has to rely on a good spreadsheet and a lot of memory power.
Diversified and Steady Wins the Race
We recently talked about the difficulty that high valuations and low interest rates pose to investors, and how to approach them. In this post, we dig deeper into the effectiveness of two key levers we discussed: staying invested and being diversified. We never really know for sure when an investment is overpriced or underpriced. And when we look at historical returns, you can miss out on large returns if you are not consistently invested and fail to time the market. Plus, not all investments react to economic events in the same way and at the same time. Having a broadly diversified portfolio across different types of stocks and bonds across many countries can help smooth out the effects of uncertainty about particular markets.
It’s Time to Smart Rebalance Your Portfolio. Here is Why, When, and How.
When should you rebalance your investments? As with many questions, the best place to start is with why. Why should we rebalance in the first place? Your asset allocation, how you allocate your savings to different investments, is a key element of an investment strategy. It represents the risk-return tradeoff you are willing to make to achieve your investment goals. You typically arrive at your asset allocation through a process that includes goal setting and understanding your risk tolerance and risk capacity. Your asset allocation, not timing market cycles or picking stocks, determines 90% of how your investment is going to perform in good and bad times.
Following along with the blogs of financial advisors is a great way to access valuable, educational information about finance — and it doesn’t cost you a thing! Our financial planners love to share their knowledge and help everyone regardless of age or assets.