Strategy Intermediate: Rebalancing Your Portfolio

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1.
If you want to save on taxes while rebalancing your portfolio, _______.
Choose wisely. There is only one correct answer.
Use new money to rebalance. Rebalancing less frequently will allow you to avoid taxes, as will selling securities from tax-deferred accounts BEFORE you sell securities from taxable accounts.
2.
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.
3.
If you have both small-company stocks and large-company stocks in your portfolio, which of them is more likely to have grown in proportion over time, assuming you haven't rebalanced during this time?
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Small-company stocks. Since small-company stocks have more growth potential, they likely will have grown more, thus necessitating rebalancing if you want to maintain the volatility level of your portfolio.
4.
How often should you rebalance your portfolio for best results?
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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 _______.
Choose wisely. There is only one correct answer.
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.