Rebalance your portfolio regularly to maintain desired allocations from "summary" of John Bogle on Investing by John C. Bogle
To follow the principle of maintaining your desired allocations, you must regularly rebalance your investment portfolio. This means periodically adjusting your investments to ensure they align with your original plan. If one investment has grown significantly, it may now make up a larger portion of your portfolio than intended. On the other hand, if another investment has performed poorly, it may now represent a smaller share of your portfolio. By rebalancing, you bring your portfolio back in line with your target allocations. Rebalancing is crucial because it helps manage risk. When a particular investment grows too large within your portfolio, you become more exposed to the risks associated with that investment. By rebalancing, you spread your risk more evenly across your investments. This reduces the impact that any single investment can have on your overall portfolio. Additionally, rebalancing can help you take advantage of market fluctuations. When you sell some of your overperforming investments and buy more of your underperforming ones, you are effectively buying low and selling high. While rebalancing your portfolio, it's important to consider your long-term investment goals. Keep in mind why you initially set your allocation targets and how they fit into your overall financial plan. By staying focused on your objectives, you can make informed decisions about which investments to adjust and by how much. Remember, the goal of rebalancing is to maintain your desired risk and return profiles over time. It's not about trying to time the market or chase short-term gains.- Regularly rebalancing your portfolio is a foundational principle of successful investing. By periodically realigning your investments with your target allocations, you can manage risk, take advantage of market opportunities, and stay true to your long-term goals. Prioritize rebalancing as a key part of your investment strategy to build a diversified and resilient portfolio.
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