In this video, we will be covering HOW TO REBALANCE YOUR INVESTMENT PORTFOLIO.

What does it mean to rebalance your investment portfolio? Rabalancing your investment portfolio is nothing more than regular maintenance for your investments, like going to the doctor for a checkup or getting your car’s oil changed. Rebalancing means selling some stocks and buying some bonds, or vice versa, so that most of the time your portfolio’s asset allocation matches the level of returns you’re trying to achieve and the amount of risk you’re comfortable taking.
And while rebalancing does involve buying and selling, it is still part of a long-term, passive investing strategy—the type that tends to do the best in the long run. In this article, we’ll talk more about what rebalancing is, as well as why, how often, and how to do it.

Key Points:
Rebalancing means selling some stocks and buying some bonds, or vice versa, so that most of the time your portfolio’s asset allocation matches your risk tolerance and desired level of returns.

There is no optimal frequency or threshold when selecting a rebalancing strategy.

When rebalancing, primarily, you want to sell overweighted assets.

The discipline of rebalancing can prevent panicked moves and increase your long-term returns.

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DISCLAIMERS & DISCLOSURES

This content is for education and entertainment purposes only. Tray does not provide tax or investment advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. All investing involves risk, including the possible loss of principal.
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Rebalancing your investment portfolio is a crucial aspect of maintaining a healthy and diversified set of investments. Over time, the allocation of your portfolio can become skewed due to market fluctuations, and it is essential to periodically rebalance to ensure that your investment goals and risk tolerance are still aligned.

Here are some simple steps to help you rebalance your investment portfolio:

1. Determine your target asset allocation: The first step in rebalancing your investment portfolio is to determine your ideal asset allocation. This will depend on your investment goals, risk tolerance, and time horizon. A common rule of thumb is the 60/40 allocation, where 60% of the portfolio is allocated to stocks and 40% to bonds. However, you should consult with a financial advisor to determine the best allocation for your specific needs.

2. Review your current portfolio: Once you have established your target asset allocation, you will need to review your current portfolio to assess how it aligns with your goals. Look at the percentage of each asset class in your portfolio and compare it with your target allocation. For example, if your target allocation is 60% stocks and 40% bonds, and you find that your current allocation is 70% stocks and 30% bonds, it is time to rebalance.

3. Rebalance your portfolio: After reviewing your current portfolio, you may need to make some adjustments to bring it back in line with your target allocation. This can involve selling some assets that are overweighted and buying assets that are underweighted. Keep in mind that this will incur transaction costs and tax implications, so it is essential to weigh these costs against the benefits of rebalancing.

4. Consider using index funds or ETFs: If you want to simplify the process of rebalancing your portfolio, consider using index funds or exchange-traded funds (ETFs) to gain exposure to a diversified set of stocks and bonds. These investment vehicles often have low expense ratios and provide broad diversification, making them a cost-effective and efficient way to rebalance your portfolio.

5. Set a regular schedule for rebalancing: To ensure that your portfolio stays aligned with your investment goals, consider setting a regular schedule for rebalancing. This could be annually, semi-annually, or quarterly, depending on your preferences and the market conditions. Setting a schedule can help you stay disciplined and avoid making emotional decisions based on short-term market fluctuations.

In conclusion, rebalancing your investment portfolio is an essential aspect of maintaining a healthy and diversified set of investments. By following these simple steps and staying disciplined, you can ensure that your portfolio remains aligned with your investment goals and risk tolerance. If you are unsure about how to rebalance your portfolio, consider seeking the advice of a financial advisor who can provide personalized guidance based on your specific needs.