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1.
How often should you rebalance your portfolio for best results?
Only as needed. Normally, rebalancing should occur only when your allocation is out of balance relative to your investment goals.
2.
Why does it become necessary to periodically rebalance your portfolio?
Some investments will naturally perform better than others and increase the risk of your portfolio. For this reason, you may need to readjust its risk level.
3.
Imagine you're investing for your retirement via a 401(k) plan and an IRA. How should you rebalance these accounts?
Rebalance both simultaneously, because they make up one portfolio. If these accounts are all funding one goal, they are, for all intents and purposes, part of one portfolio. So when you rebalance, rebalance across all of these accounts simultaneously.
4.
Rebalancing your portfolio is ultimately meant to keep it in synch with your investment goals.
True. As it grows out of synch with your goals over time, you need to rebalance it to keep it in line.
5.
What's the primary reason to rebalance?
To control your portfolio's volatility. By rebalancing, you ensure that your portfolio isn't overly dependent on the success or failure of one investment, asset class, or style.
