An important part of handling your investments is taking a look at your investment mix (or portfolio) once in a while to see if it’s still invested the way you want. If not, it may need to be rebalanced. To rebalance means to change the portion of your investments in various categories back to the original percentage allocation.
How rebalancing can help maintain your investment strategy1
- Market ups and downs can cause your desired investment mix to get out of balance.
- These inevitable changes can increase your risk.
- Periodic rebalancing can return your investments back to a more comfortable place.
Rebalancing can help keep your portfolio on track
Rebalancing is a fairly simple concept. You sell some of your investments that have become overweighted and buy investments that are now underweighted. The result it is an investment mix that is back in line with your risk comfort level. While rebalancing does not guarantee you won’t lose money, it can help keep you on track toward your investing goals, while helping to smooth out the ups and downs over time.
Rebalancing made easy
Many investment companies make it easy to rebalance your investments periodically. Here are some of the services that may be available to you:
- Exchange money from one fund to another by percentages or dollar amount.
- Automatically rebalance your investments once a year on a specific date.
- A personal advisor makes day-to-day decisions for you in a managed account.2
Before your portfolio can be rebalanced to align with your goals, it is a good idea to have a plan in place. Consider talking with a consultant to develop an action plan tailored to your situation. If you are not on an automatic rebalancing plan, check your investments at least once per year to see if you need to rebalance.