Strategy Intermediate: Rebalancing Your Portfolio

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1.
If you want to save on taxes while rebalancing your portfolio, you would do best by selling investments held in _______ accounts.
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Tax-deferred. You will rack up much less in capital gains this way.
2.
Imagine you're investing for your retirement via a 401(k) plan and an IRA. How should you rebalance these accounts?
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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.
Rebalancing often requires you to _______.
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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.
4.
What's the primary reason to rebalance?
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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.
5.
Selling some winning investments earlier than you'd like and then buying new investments has some advantages. These advantages include which of the following?
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All of the above. All of these are reasons to sell off winning investments and thus rebalance your portfolio.