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Rebalance your portfolio regularly to maintain your desired asset allocation from "summary" of The Four Pillars of Investing: Lessons for Building a Winning Portfolio by William J. Bernstein
To maintain the desired allocation, investors need to periodically rebalance their portfolios. This means selling assets that have done well and buying those that have done poorly, which, counterintuitively, is exactly the opposite of what most people do. For example, if equities have a great year and bonds a bad one, the stock portion of your portfolio will grow, potentially out of proportion to your target allocation. Consequently, you will need to sell some equities and buy some bonds. Over time, your portfolio allocation will drift from its target mix, and this will increase its risk. Most investors are reluctant to rebalance because it forces them to sell assets that have done well and buy those that have done poorly. This behavior is directly contrary to the "buy high, sell low" instinct that is so hard to overcome. But rebalancing is essential. In the long run, it is not the return of ...
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