Why Now May Be the Right Time to Rebalance Your Portfolio

For investors who have not done so as of yet, rebalancing a portfolio can prove to be a useful exercise over the long term as a method of ensuring the securities making up said portfolio remain within the pre-set limits put forward by the investor who constructed the portfolio.

Having a strategy set out early on with pre-set allocations for various asset classes can be a good way to limit the given risk profile of a portfolio, providing a long-term balance of safety and return which meets the particular individual needs of an investor.

With the recent run many equities have seen of late (with fixed income generally under performing), it stands to reason that many portfolios will now see various asset class allocations out of whack. Either adding additional funds to invest in asset classes which have grown at a slower rate than equities or selling some equities to fund the fixed income/alternative investment portion of a portfolio are two ways of accomplishing the same task.

In general, most financial advisors suggest a portfolio rebalancing semi-annually to compensate for short-term movements in markets that may affect a portfolio significantly. As we are now in the third quarter, in a period of time which is generally considered to be difficult for equities (late summer), making the choice to rebalance now instead of later may prove to be a wise decision.

Invest wisely, my friends.