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How Often Should You Rebalance Your Portfolio?

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Personal Finance

October 13, 2016

Rebalance your Portfolio?

Rebalancing refers to action that an investor takes that includes buying or selling investments in their portfolio so that the allocation remains steady despite market fluctuation. Rebalancing has often made the average investor’s calendar on a semi-annual or an annual basis. Given the recent market changes and the upcoming year-end, this topic is gaining interest once again and raises questions such as, when is the opportune time for a rebalance and how often should the average investor rebalance?

Whether you are a self-investor and monitor your own accounts or have a trusted financial advisor, rebalancing is likely a part of your financial strategy. Rebalancing is a good way of ensuring that your allocation is in order and your portfolio is a match with your risk level and time horizon. It also allows for selling some of the top performing investments and investing that money in lower performers, helping to encourage a buy low and sell high strategy.

It can be a struggle for some individual investors, as there may be emotional ties to the market, prompting rebalancing on a frequent basis, and also costs for transactions or taxable events to consider. On the other hand, some may choose a buy and hold strategy and rebalance only when allocations move largely outside the original allocation. However, if you rebalance only at a set time every year, this inflexibility with timing can have its drawbacks too. You may miss out on opportunities especially in a volatile market where price swings can be large.

Although rebalancing frequently could also work against you, as rebalancing too often could result in selling off good investments too soon and too often. Also, your financial needs should be taken into consideration with each rebalance. For example, if you may need to use the money sooner rather than later, a more active rebalancing strategy may be needed to ensure you don’t end up selling out of investments at an inopportune time, costing you money.

Having a financial professional to actively monitor your investments is a choice that can save you time, and not only the time spent addressing market and portfolio changes, but potentially your time until retirement. It could potentially save you money as well, since you would likely have the option of a managed account, meaning there are no transaction fees but one overall fee for all transactions made. Most importantly, your financial professional can help set guidelines that are appropriate for your time horizon, retirement plans and risk tolerance, as well as ensure your portfolio is in balance for your customized strategy at all times to keep your goals within reach.

If you have questions about your portfolio, schedule a 15-minute call with one of our advisors. Bayntree Wealth Advisors takes pride in helping each client understand the risk they are currently taking on in their portfolio and helps to ensure their overall financial situation is aligned with their long-term goals. Bayntree Wealth Advisors is a nationally-recognized firm dedicated to working with clients to design a retirement roadmap that will help meet all of their goals.

‍Bayntree does not provide specific legal or tax advice. Please consult with your tax advisor or legal professional for guidance with your individual situation.

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