Rebalance your portfolio as needed from "summary" of Investing for Dummies by Eric Kevin Tyson
When it comes to managing your investments, it's important to remember that the financial markets are constantly changing. What was once a winning investment may not continue to perform as well in the future. That's why it's crucial to regularly review your portfolio and make adjustments as needed. Rebalancing your portfolio involves selling off investments that have grown significantly in value and buying more of those that have underperformed. This helps you maintain a balanced mix of assets that aligns with your investment goals and risk tolerance. For example, let's say you originally invested 60% of your portfolio in stocks and 40% in bonds. Over time, the stock market performs exceptionally well, causing your stock holdings to increase to 80% of your portfolio. In this scenario, you may want to sell off some of your stocks and buy more bonds to bring your asset allocation back to 60/40. On the flip side, if the bond market outperforms stocks, you may need to adjust your portfolio by selling off some bonds and buying more stocks to maintain your desired asset allocation. By rebalancing your portfolio regularly, you can help manage risk and ensure that you stay on track to meet your investment objectives. It's a proactive approach to investing that can help you navigate the ups and downs of the market with more confidence. Remember, what worked in the past may not work in the future, so it's important to stay agile and make changes as needed.
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