A lot goes into managing your investment portfolio. The initial investments, repeated discussions with your firm, and many other steps. One thing that can be easily overlooked is proper rebalancing of your portfolio. The act of portfolio rebalancing can seem somewhat counterintuitive at times, as it can seem to involve selling an asset that is performing well to buy one that is not. But the asset being bought may have better characteristics such as growing cash flow or dividend distribution, and with a little education, this process will make a lot more sense. In time, you’ll understand why portfolio management companies value portfolio rebalancing so highly.
What Is Rebalancing?
Portfolio rebalancing is using your portfolio management services to ensure that the value of your portfolio aligns with your initial vision. As an example, if you initially wanted an even split of stocks and bonds, but over time, your stocks had severely outperformed your bonds, you could find yourself with a 70/30 split, or something even more extreme. Many portfolio management firms at this point would recommend that you sell some stocks and buy some bonds to bring that closer to your initial vision. This seems counterintuitive at first, but it aligns with the old “buy low sell high” adage for investing. Plenty of portfolio management companies will encourage you to go this route and there’s a good reason for it.
Why Should I Do It?
Rebalancing your portfolio is an excellent way to manage risk. You’re able to lock in the profits on your previous investments and invest in other rising stocks with that profit. This enables you to grow your portfolio while also cashing out and minimizing your risks. A lot of portfolio management services will encourage you to do this on a regular basis. Depending on the portfolio management firms, they may want you to do this as often as quarterly, or as infrequently as yearly, or something else, depending on your needs.
How Can I Do It?
If you want to balance your portfolio, it’s going to be essential to find a firm you can trust. You’ll want to find a firm that puts its clients first so you know that they’re doing the right amount of research and rebalancing your portfolio with attention to detail. Rebalancing a portfolio is much harder than it sounds so you need the best in your corner. Enriched Investing Incorporated is who you need the next time you’re looking to rebalance your portfolio.