Time to Rebalance?

Because the stock market has been on an upward trend in the second half of 2020 and the first month of 2021, it’s time to check your asset allocation. We’ve noticed the stock portion of many client portfolios are now 5% or more over their target asset allocation and therein lies risk.

That is, if the the stock market has a down-turn (and I’m not speculating that it will anytime soon, but then no one know the future including me), you will lose portfolio value. Thus, the smart thing to do is to sell stocks and buy bonds. Right about here, I can hear you thinking to yourself, “Is he crazy? He wants me to sell my stock mutual funds (or ETFs) because they’re doing too good and buy bond funds that yield almost nothing right now?”

Yes, that’s what I’m saying. Go against your emotional instincts and sell your winners and buy your losers. However, the reason for this seemingly crazy act is important. You’re not selling/buying based on any short-term event or future projection. You’re acting intelligently, prudently and wisely by rebalancing back to the target asset allocation you set with your financial advisor during calm, rational times.

Rebalancing is the secret sauce to ultimate investment success. Easy to say and hard to do.