Finance How to rebalance your portfolio Understanding the why, when, and how of portfolio rebalancing The first half of 2017 was pretty good to investors. Equity markets (particularly in the U.S.) have turned in a strong performance. Bonds have lost some ground, but less than had been anticipated. Meanwhile, things in Europe and Asia look to be improving after a period of uncertainty. All that is certainly good news. But it does raise some challenges. In fact, the length of the current bull market in U.S. equities (currently eight years and counting) has likely left many portfolios out of sync with long-termfinancial goals and overall risk tolerance. It’s counterintuitive but, in investing, too much of a good thing isn’t always a good thing. That’s why veteran investors are in the habit of rebalancing their portfolios, in order to bring them back in line with their long-term allocation targets and overall appetite for risk. By shuffling funds out of assets which have experienced strong performance, and into assets that haven’t performed as strongly (or even assets that have declined in value), you can minimize overall portfolio risk over the long term. But that brings up an important question: how exactly are you supposed to do that? And how often? And how much? Here’s a brief rundown on why rebalancing your portfolio is such an important thing to do, along with how and when you should do it. By James Dolan 28 | www.snowbirds.org
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