Strategy Intermediate: Rebalancing Your Portfolio

Test your knowledge

Choose wisely. There is only one correct answer to each question.

0%
Keep studying!
Review your answers below to learn more.
1.
Selling some winning investments earlier than you'd like and then buying new investments has some advantages. These advantages include which of the following?
Choose wisely. There is only one correct answer.
All of the above. All of these are reasons to sell off winning investments and thus rebalance your portfolio.
2.
Rebalancing your portfolio involves looking at where it has become lopsided over the years. What is most likely to have happened, as a general rule, with your bond and cash investments during this time?
Choose wisely. There is only one correct answer.
They will have shrunk in proportion to stocks. Generally, stocks will have grown faster, leaving the bonds and cash in a lower proportion of your portfolio. This usually calls for some rebalancing.
3.
If you want to save on taxes while rebalancing your portfolio, you would do best by selling investments held in _______ accounts.
Choose wisely. There is only one correct answer.
Tax-deferred. You will rack up much less in capital gains this way.
4.
Why does it become necessary to periodically rebalance your portfolio?
Choose wisely. There is only one correct answer.
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.
5.
How often should you rebalance your portfolio for best results?
Choose wisely. There is only one correct answer.
Only as needed. Normally, rebalancing should occur only when your allocation is out of balance relative to your investment goals.