![](https://thefinancialmag.com/wp-content/uploads/2023/10/pexels-kaboompics-com-6351-1000x600.jpg)
The 4 Optimal Times to Consider Rebalancing Your Portfolio
![](https://thefinancialmag.com/wp-content/uploads/2023/10/pexels-kaboompics-com-6351-1000x600.jpg)
Navigating the investment world is like hopping on a roller coaster—ups, downs, twists, and turns galore. Whether you’re a hands-on trader or prefer a laid-back approach, there’s a secret weapon you should always keep in your investment arsenal: portfolio rebalancing. It’s like fine-tuning your financial playlist to match your goals and risk vibe.
Do you know what Rob Haworth (that investment strategist guru) says? “Rebalancing your portfolio? It’s like a dance between risk and reward.” It’s the game-changer that keeps your investments in harmony, even when the market’s spinning. So, let’s roll through four epic moments when tweaking your portfolio can make a splash in your financial journey.
When There’s Market Volatility
Market volatility is one of the most common triggers for portfolio rebalancing. It’s a way to gauge how far your investments have strayed from your target goals. Consider setting “drift parameters” in consultation with a financial professional to do this effectively.
These parameters define the level of volatility you can comfortably handle. If you find yourself reaping double-digit gains or suffering double-digit losses, it’s a clear signal to rebalance.
![](https://thefinancialmag.com/wp-content/uploads/2023/10/Antoni-Shkraba-e1697969994400.jpg)
Antoni Shkraba/ Pexels | Market volatility is one of the most common triggers for portfolio rebalancing
Imagine a simple portfolio with 60% stocks and 40% bonds. When the stock market is soaring, your stock holdings might increase. However, it’s time to rebalance if stocks start creeping up to 70% of your portfolio. This approach allows the market some wiggle room while flagging extreme deviations.
But remember, don’t get swept up in the media’s sensationalism. Instead, use market volatility reports as conversation starters with your financial professional.
When Major Life Events Are on the Horizon
Major life events often prompt a closer look at your investments. You might already have a diversified strategy that suits your changing priorities, but big milestones are an ideal time to review your holdings.
For instance, receiving an inheritance after a family member’s passing could boost your investment capacity. In this case, rebalancing should be part of the plan. Haworth advises, “From a returns perspective, we advocate investing any windfall fully and right away, rather than waiting.”
Life-changing events can also lead to a complete reassessment of your financial goals. Rebalancing can help you create a new portfolio tailored to your evolving needs in the face of unexpected situations, such as a health crisis.
![](https://thefinancialmag.com/wp-content/uploads/2023/10/pexels-karolina-grabowska-7876721.jpg)
Karolina Grabowska/ Pexels | Major life events often prompt us to reassess our investments
When Diversification Concerns Arise
Diversification is a cornerstone of a well-performing portfolio. If you have doubts about your portfolio’s diversification, consult your financial professional about rebalancing.
Similarly, if you’re intrigued by new investment opportunities, like international stocks or emerging technology companies, consider rebalancing to incorporate these assets.
When You’ve Neglected Rebalancing for Too Long
If you haven’t rebalanced your portfolio recently, it’s high time to reconnect with your financial professional.
Haworth recommends reviewing your portfolio on a quarterly or annual basis. He emphasizes, “This reassessment may not lead to any activity, but at least you’ll know you’re on track.” Regular check-ins help you stay informed about your portfolio’s performance and maintain a level-headed approach rather than reacting to market turbulence.
![](https://thefinancialmag.com/wp-content/uploads/2023/10/Tima-Miroshnichenko-Pexels.jpg)
Tima Miroshnichenko/ Pexels | Successful investing is about managing risk, not avoiding it
The Costs of Portfolio Rebalancing
While rebalancing offers numerous benefits, it’s essential to acknowledge the associated costs. Transaction costs can eat into your returns, especially if your deviations from your target are minor, around 1 or 2%. In such cases, the costs often outweigh the benefits.
Rebalancing With a Financial Professional
A financial professional brings invaluable expertise and analytical tools when considering rebalancing. They can evaluate market trends and fundamentals, ensuring that any rebalancing activity aligns with your unique situation. Remember, sometimes, it may be wiser to hold off on rebalancing if the market is heading in a certain direction without solid supporting fundamentals.
Having this extra layer of analysis can provide the confidence you need to make informed investment decisions. So, when in doubt, don’t hesitate to consult your financial professional and take proactive steps to keep your portfolio on track.
More inTrade & Markets
-
How Blue Zone Living Can Help You Live a Happier & Healthier Life
Have you ever dreamt of living a life that is not just longer but richer in health and happiness? Well, get...
March 4, 2024 -
Why Financial Advisors Need to Be More Flexible & Adaptable
Today, the call for financial advisors to embrace flexibility and adaptability has been louder than ever before. Gone are the days...
February 29, 2024 -
Looking to Invest Like Warren Buffett? Try Public Storage (NYSE: PSA)
When it comes to investment strategies, few names are as revered as Warren Buffett’s. The Oracle of Omaha is known for...
February 20, 2024 -
Everything You Need to Know About Reverse Mortgages
Imagine if your home, your cozy refuge from the world, could also be your golden goose. No, it won’t start laying...
February 13, 2024 -
Living With Less and Loving More: A Modern Woman’s Guide to Minimalism
In a world overflowing with choices, where trends scream for attention and “more” seems to be the mantra, the allure of...
February 6, 2024 -
Long-term Investment Thrives Despite Unpredictable Stock Market Fluctuations
The journey of the stock market is akin to navigating through a constantly changing seascape. From the highs of early 2022...
January 31, 2024 -
Can Big Tech Reverse the Stock Market Downtrend?
Big tech stocks have influenced the financial markets over the past week. Nvidia spearheaded this influence with its impressive performance. Despite...
January 24, 2024 -
Buying Your Dream House? Embrace Climate Change as the New Reality
Home buying and selling is undergoing a dramatic transformation, thanks to climate change. This global issue is no longer an abstract...
January 16, 2024 -
How to Keep Your Bread Fresh & Tasty For Long? 6 Creative Ways
Let’s talk about something we all dread – moldy bread. It is not just about the unappetizing look. Mold on bread...
January 10, 2024
You must be logged in to post a comment Login