Strategy Intermediate: Rebalancing Your Portfolio

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1.
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?
Choose wisely. There is only one correct answer.
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.
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?
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.
3.
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.
4.
Imagine you're investing for your retirement via a 401(k) plan and an IRA. How should you rebalance these accounts?
Choose wisely. There is only one correct answer.
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.
5.
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.