This article is about whether and how to rebalance your investments, to keep them aligned with your financial goals. Although many advisers recommend rebalancing your portfolio every year or quarter, without fail, the research summarized here finds that other methods may be better.
Rules for Rebalancing
Often, articles and commentary about rebalancing make these recommendations:
While valid, these assertions miss key findings from research on the behavior of financial markets. The history of stock and bond investments, when examined systematically, reveals five rules for rebalancing ...
- In your personal financial plan, set targets for the percentages of your assets to be invested in stocks and bonds.
- Periodically, move money between your stock and bond investments to keep your allocated percentages on-target.
- Rebalancing in this manner will maintain your intended level of risk and help you stay the course toward your goals.
- It might also improve your portfolio's returns by a small amount, although it is not guaranteed to do so.
While valid, these assertions miss key findings from research on the behavior of financial markets. The history of stock and bond investments, when examined systematically, reveals five rules for rebalancing ...
The rest of this article has been updated and moved to a new site. The updated article has new information on how to apply the rules for rebalancing, on best practices and current fees, and much more. To continue reading, please go to:
https://likelyso.com/rebalancing
- AC Wilkinson
September 3, 2020
https://likelyso.com/rebalancing
- AC Wilkinson
September 3, 2020