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Schedule a Time to Rebalance Your Portfolio

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Schedule a Time to Rebalance Your Portfolio

By creating an investment blueprint, knowing what investments you already own, and matching your investments to your portfolio, you’ve crafted a portfolio that you can live with. You’ll want to make sure that it continues to fit your goals and needs, though. That requires occasionally rebalancing, or restoring the original blueprint.

Things To Know

  • Your risk patterns will change over time.
  • Keep your goal in mind as you rebalance.

How your stock allocation will change

Stocks often gain more than bonds or cash. Over long periods of time, stocks will probably take up more of your portfolio than they did in your original blueprint. Because stocks are riskier investments than bonds, your portfolio is becoming riskier as your stock position rises. That’s why it’s important to rebalance and restore your portfolio to its original pattern.

Similarly, not all stocks do well at the same time. Maybe your value stocks are outpacing your growth investments. If you don’t restore your portfolio’s original balance between the two styles, your investment success will become increasingly dependent on your value investments.

Remember how age will affect your portfolio

When you rebalance, keep your goal in mind. As you get closer to needing the money you’ve invested, the pattern you originally drew should change. Your portfolio should become more conservative as you approach your goal.