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Rebalance your portfolio annually from "summary" of The Little Book That Beats the Market by Joel Greenblatt
One of the key principles in investing is to regularly review and adjust your portfolio. By rebalancing your investments on an annual basis, you can ensure that your asset allocation remains in line with your long-term goals and risk tolerance. This practice involves selling off investments that have performed well and reallocating the proceeds into those that have underperformed. In doing so, you are essentially "buying low and selling high," a fundamental strategy for maximizing returns over time. Rebalancing your portfolio annually also helps to mitigate risk by preventing any one asset class from dominating your portfolio. For example, if stocks have surged in value over the past year, they may represent a larger proportion of your portfolio than you originally intended. By selling off some of your stock holdings and reinvesting in other asset classes like bonds or real estate, you can maintain a more diversified portfolio and reduce the impact of market volatility on your overall returns. Another benefit of annual rebalancing is that it forces investors to take a disciplined approach to their investment strategy. Instead of being swayed by short-term market trends or emotional reactions to market fluctuations, rebalancing encourages investors to stick to their long-term investment goals and remain focused on the bigger picture. This can help prevent impulsive decision-making and ensure that your portfolio remains aligned with your financial objectives over time.- Rebalancing your portfolio annually is a simple yet powerful strategy for optimizing your investment returns and managing risk. By regularly reviewing and adjusting your asset allocation, you can improve the overall performance of your portfolio and stay on track towards achieving your financial goals. So, make it a habit to rebalance your investments on an annual basis and reap the rewards of a well-structured and disciplined approach to investing.
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