Rebalancing Your Accounts

About The Case

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  • Because the stock market is significantly overvalued at this time, now is an excellent time to consider rebalancing your portfolio.
  • For example, if eight years ago you were comfortable with an asset allocation of 60% in stocks and 40% in bonds, now, after more than a doubling of the stock market, that portfolio might be 75% stocks and 25% bonds.
  • By rebalancing instead of selling what has gone down or buying what has gone up, rebalancing puts your asset allocation and risk level back to the original 60/40/
  • Retirement accounts are ideal for rebalancing, because they enable you to buy and sell within the account  with no tax consequences, and usually no fee or commission.
  • Investors approaching retirement who fail to rebalance might unwillingly end up closer to retirement with a riskier portfolio.
  • That is why, when such investors rebalance, they might want to update their target allocation.

Diversification, rebalancing, and asset allocation strategies do not assure a profit or protect against loss.


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