Choose wisely. There is only one correct answer to each question.
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1.
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.
2.
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.
3.
Selling some winning investments earlier than you'd like and then buying new investments has some advantages. These advantages include which of the following?
All of the above. All of these are reasons to sell off winning investments and thus rebalance your portfolio.
4.
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.
5.
Rebalancing often requires you to _______.
Sell some of your winners. Investments that have done well will begin to take up more of your portfolio; those that haven't done as well will take up less. To restore balance, you may need to sell some of your winners.