{"id":9832,"date":"2021-09-09T12:28:24","date_gmt":"2021-09-09T12:28:24","guid":{"rendered":"https:\/\/zackspcg.com\/blog\/?p=9832"},"modified":"2022-02-26T13:05:37","modified_gmt":"2022-02-26T13:05:37","slug":"why-investors-should-rebalance-their-portfolios","status":"publish","type":"post","link":"https:\/\/zacksim.com\/blog\/why-investors-should-rebalance-their-portfolios\/","title":{"rendered":"Why Investors Should Rebalance Their Portfolios"},"content":{"rendered":"\n<p><em>Dean A. from Los Angeles, CA asks: <\/em>Mitch, I\u2019d like to hear your thoughts on portfolio rebalancing. Whether rebalancing is important, how often should a retired person do it, what are some of the important things to consider when rebalancing, and so on. Thank you for your time. <\/p>\n\n\n\n<p><strong>Mitch\u2019s Response:<\/strong><\/p>\n\n\n\n<p>Thank you for emailing your question, Dean. The short answer\nto your question is that rebalancing is a very important part of portfolio\nmanagement, and there are not very many good reasons to avoid doing it. Investors\nshould rebalance at least once a year, but maybe more if market conditions\nwarrant. <\/p>\n\n\n\n<p>Rebalancing is important for a variety of reasons, but\nperhaps most importantly, it ensures that an investor\u2019s portfolio allocation\nremains in line with that person\u2019s recommended allocation. In other words, if an\ninvestor\u2019s goals, risk tolerance, time horizon, and income needs generate a\nrecommended asset allocation of 70% U.S. stocks, 20% investment-grade corporate\nbonds, and 10% municipal bonds, rebalancing can ensure those exposures remain\nconsistent.<sup>1<\/sup><\/p>\n\n\n\n<p><sup>______________________________________________________________________________________________<\/sup><\/p>\n\n\n\n<p><strong><a href=\"https:\/\/go.steadyinvestor.com\/download-ultimate-retirement-portfolio?source=website&amp;medium=blog&amp;term=mitchsmailbox_zim_2021_09_09&amp;content=ultimate_retirement_portfolio\">Rebalance Your Portfolio to Meet Your Ultimate Retirement Goals!<\/a><\/strong><\/p>\n\n\n\n<p>For investors nearing retirement, it\u2019s common for market ups and downs to cause you to worry and become uncertain about your financial future. Our advice is to put in the time and effort! The key is to define your investment objectives, determine your asset allocation, and manage your investments over time. <\/p>\n\n\n\n<p>To\nhelp you better prepare and plan for retirement while navigating through the market\ndownturns, we\u2019re offering our guide,<em> 7 Secrets to Building the Ultimate DIY\nRetirement Portfolio<\/em>, that covers:<\/p>\n\n\n\n<ul class=\"wp-block-list\"><li>How to accurately establish your retirement income needs<\/li><li>Developing an investment discipline that allows you to get good results over time<\/li><li>Investing rules to help you avoid self-sabotage<\/li><li><strong><em>Plus, our views on key steps to create and maintain the      ultimate retirement portfolio<\/em><\/strong><\/li><\/ul>\n\n\n\n<p>If you\nhave $500,000 or more to invest, get this guide to learn our ideas on building\nand maintaining a retirement portfolio to potentially achieve your long-term\ngoals.<\/p>\n\n\n\n<p><strong><a href=\"https:\/\/go.steadyinvestor.com\/download-ultimate-retirement-portfolio?source=website&amp;medium=blog&amp;term=mitchsmailbox_zim_2021_09_09&amp;content=ultimate_retirement_portfolio\">Get our FREE guide:\u00a07 Secrets to Building the Ultimate DIY Retirement Portfolio<\/a><sup><a href=\"https:\/\/go.steadyinvestor.com\/download-ultimate-retirement-portfolio?source=website&amp;medium=blog&amp;term=mitchsmailbox_zim_2021_09_09&amp;content=ultimate_retirement_portfolio\">2<\/a><\/sup><\/strong><\/p>\n\n\n\n<p><sup>______________________________________________________________________________________________<\/sup><\/p>\n\n\n\n<p>To the second part of your\nquestion, I would say that rebalancing is important for all investors but\nespecially those in retirement. That\u2019s when risk management is critical, and\nit\u2019s also when some of the consequences of not rebalancing \u2013 like becoming\nover-exposed to a particular asset class \u2013 can lead to adverse outcomes. <\/p>\n\n\n\n<p>A recent example I saw from Vanguard showed that someone who\nretired five years ago with a portfolio of 60% global equities \/ 40% bonds and\nnever rebalanced, would today have a 72% global equity \/ 28% bond portfolio. This\njump in equity exposure may compromise a retiree\u2019s plans for generating income,\ncontrolling volatility, or both. The act of rebalancing can bring the asset\nallocation back where it should be.<\/p>\n\n\n\n<p>As for how often to rebalance, studies have shown over the\nyears that there is no significant benefit from rebalancing every month, versus\nevery quarter, versus every year. In my view, rebalancing once a year is\ngenerally sufficient, unless an investor\u2019s goals or needs change along the way,\nor unless the fundamentals of the economy and market change in such a way that\nit makes sense to adjust the asset allocation. Otherwise, checking in from time\nto time is generally a good practice.<\/p>\n\n\n\n<p>Even though rebalancing is a fairly straightforward and\nbeneficial undertaking, only about 50% of retail investors do it, according to\nVanguard. That figure, of course, is way too low, especially if some of those\npeople are retired. <\/p>\n\n\n\n<p>This brings up a final point \u2013 rebalancing in tax-deferred\naccounts like IRAs and 401(k)s is different than rebalancing in taxable\nbrokerage accounts, due to capital gains considerations. I am of the mind that\ninvestors should not let the \u2018tax tail wag the investment dog,\u2019 but how you go\nabout rebalancing every year should likely consider taxes. There may be\nstrategic ways to minimize taxes while achieving the desired outcome at the\nsame time.<\/p>\n\n\n\n<p>Rebalancing your portfolio takes a lot of work and dedication, especially for those who are preparing for retirement. We want to share some additional steps to help protect your investments and create a portfolio that meets your financial goals. To help you do this, I recommend reading our guide,\u00a0<em>7 Secrets to Building the Ultimate DIY Retirement Portfolio<\/em>.<sup>3<\/sup><br><\/p>\n\n\n\n<p>If you have $500,000 or more to invest, get this guide to learn our ideas on the step-by-step process of building and maintaining a retirement portfolio that will potentially help you reach your goals and enjoy a secure retirement.\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Rebalancing is a simple, but essential, way to ensure that your portfolio allocations stay aligned with your goals<\/p>\n","protected":false},"author":3,"featured_media":7436,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[66,71],"tags":[],"class_list":["post-9832","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitchs-mailbox","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9832","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=9832"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9832\/revisions"}],"predecessor-version":[{"id":10316,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/9832\/revisions\/10316"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=9832"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=9832"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=9832"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}