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How to rebalance your portfolio

Very few private investors give much thought to asset allocation, even though it’s far more important than picking stocks or funds in determining your investment returns. Even worse, those who do set up a nicely diversified portfolio often forget all about their ideal asset mix once they’ve made their initial decisions! This is foolish, and [...]

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I have previously discussed why rebalancing your portfolio is a good idea. In short, by reducing or adding to your holdings in different asset classes, you can smooth your returns and keep risk within a level you can tolerate. How do you actually do it? Well, rebalancing is definitely an art more than a science. [...]


Once you’ve committed to rebalancing your portfolio to maintain your chosen asset allocation, you need to decide when you’ll do the deed. As usual, I’m definitely not going to give you a precise plan on how often you should rebalance. I think there’s no perfect answer, and you need to decide for yourself. That said, [...]


When deciding how often to rebalance your portfolio, you’ll need to consider several factors, including: The kinds of assets you hold The cost of trading such assets Tax issues The free time you have available Your personal judgement How often you can be bothered to do it I’m serious about that last point, incidentally. If [...]


Few people like to think about getting older, but you should try to do so when you’re rebalancing your portfolio.


Assuming you’re not investing for the Government’s benefit, you need to keep an eye on tax when rebalancing your portfolio.


The simplest way to rebalance your portfolio

Calendar rebalancing is the simplest way to rebalance and ensures that your portfolio doesn’t get bloated with risk. But how frequently should you do it?


Threshold rebalancing offers a number of easy-to-follow strategies that enable you to fine tune your portfolio’s exposure to risk.


Rebalancing with new contributions is the best way for investors with small portfolios to hit their target asset-allocation without excessive cost.