Strategy Intermediate: Rebalancing Your Portfolio

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1.
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?
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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.
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.
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.
4.
Rebalancing your portfolio is ultimately meant to keep it in synch with your investment goals.
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True. As it grows out of synch with your goals over time, you need to rebalance it to keep it in line.
5.
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.