Every week I read a large number of personal finance and investing articles. Here’s my latest shortcut to the best.
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, the rest of this post will look at the main approaches to deciding how often you’ll rebalance.
Rebalancing at regular time intervals
There are arguments made for rebalancing from every period from daily to monthly to once-a-decade.
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.
We’ve talked before about how there are no rules for constructing the perfectly diversified portfolio – unless you believe in utterly efficient markets AND you know yourself better than a Zen master and so can anticipate your reaction to any kind of market conditions!
Equally, there’s no perfect method of rebalancing. But there are definitely factors you should keep in mind.
Hence this series on how to go about rebalancing your portfolio.
Make sure you’ve read that first post on why you should rebalance, and please do subscribe or bookmark this site to get the rest of the series.
For the rest of this article, we’ll discuss the crucial decision you must make before rebalancing.
Most of the benefits of investing are obvious. Many would say they amount to zero – or rather all the zeros you hope to see at the end of your bank balance!
More thoughtful souls ask what successful investing could translate into, whether it be the sports cars and fancy holidays you imagine as a young investor to the early retirement, freedom, or even health care opportunities you’ll probably find are as important when you’ve actually made it.
What about living for longer? That’s not a benefit of investing you hear about often, but perhaps we should, since most of the great investors lived long lives.