Once you have set up your investment portfolio, you’ll want to review it at least once a year to make sure that your investment mix is still aligned with your financial objectives. Is your asset allocation still in line with your strategy? Is it time to reallocate your assets?

Be sure that your portfolio is diversified. Diversification can help reduce your portfolio’s market risk under various market conditions. It can also dampen the impact of a volatile market. Diversification cannot assure a profit or protect against loss in a declining market.

Rebalancing: Keeping your investment strategy on track
Investing is a long-term process. Choosing a well-balanced portfolio should help your investment accounts weather the inevitable ups and downs of the market over time.

Sticking with your investment strategy does not mean ignoring your investments. Financial advisors suggest revisiting your asset allocation—the combination of stocks, bonds, and money market/stable value investments in your account—at least once a year to see if your portfolio needs to be rebalanced.

What causes your portfolio to change?
Over time, the rise and fall of financial markets could disturb your asset allocation, changing your investment mix. For example, suppose several years ago you chose to invest your portfolio to have 60% in stocks, 30% in bonds, and 10% in money market/stable value investments. If the value of your stock investments declined, your overall portfolio allocation could shift to 50% stocks, 40% bonds, and 10% money market/stable value investments. Rebalancing your portfolio simply means making adjustments to your allocation to restore your desired investment strategy.

 

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