One of the most challenging parts of managing a portfolio is to avoid getting caught up with the day-to-day and month-to-month swings of global stock and bond markets. A sound investment strategy dictates that you should try to maintain a consistent portfolio allocation for longer periods of time, but that can be hard to do when markets are often volatile.
Rebalancing is the solution, and it is a key component of any long-term strategy. At times, it can be counterintuitive, but the idea is to keep your portfolio at or near its target by selling some of your investments that likely have performed well and are above their target, and using those proceeds to buy assets that are below their target. With a disciplined, periodic rebalancing plan in place, you can systematically sell assets at higher prices and buy assets at lower prices, and over the course of time, prevent your portfolio from transforming into something that no longer fits your risk and return needs. Click on the video for Matt Showley’s short discussion about portfolio rebalancing.
CCMI provides personalized fee-only financial planning and investment management services to business owners, professionals, individuals and families in San Diego and throughout the country. CCMI has a team of CERTIFIED FINANCIAL PLANNERTM professionals who act as fiduciaries, which means our clients’ interests always come first.
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