Periodic Rebalancing

Periodic Rebalancing

by Caitlin Combest on Aug 8, 2017

Rebalancing involves periodically buying or selling assets in a portfolio to maintain an original desired level of asset allocation. These actions are often taken to ensure the amount of risk involved is at the investor's desired level. One of the most common areas investors look to rebalance are the allocations within their retirement accounts. Market fluctuations are inevitable and with that, rebalancing your portfolio as you are inching closer towards retirement can really be beneficial. When there are huge fluctuations in the market, chances are your asset allocation will shift since the value of some investments will grow or shrink faster than others. If your investment goals and time horizon have not changed, you may want to maintain your original allocations. Another option is to consider investing in a target date fund, which attempts to balance investors’ needs for both returns and stability.

By having funds spread out across multiple stocks, a downturn in one will be partially offset by the activities of the others, which can provide a level of portfolio stability. If rebalancing can provide stability then the risk you have taken is rewarded. Although there is no specific amount of time in between rebalancing, most recommendations say to examine allocations at least once a year. By talking with your advisor you can work on developing a plan that’s right for you.

http://www.investopedia.com/terms/r/rebalancing.asp    

https://www.americanfunds.com/individual/planning/market-fluctuations/nearing-retirement-volatility.html?k_clickid=_kenshoo_clickid_&cid=ps_msn_50553