Sunday, December 7, 2008

Rebalancing the Way to Succeed

It's a essential to rebalance your portfolio every 6 months or at least once a year because some of your asset may be overvalued and some may be undervalued. In the other words, Rebalancing your portfolio will force you to sell high (overpriced assets) and buy low (underpriced assets) automatically.

You can use a risk-management or time-management approach depend on your style. If your portfolio have low-cost commission; you might consider to rebalance often as your asset allocation change. For instance, if your portfolio mix of 75/25 in stock and bond whenever stock portion eat up your portfolio more than 75%, you need to sell some of those stock and buy some bond to bring back to 72/25 ratio.

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