This week I’m talking about how to rebalance your investment portfolio. Rebalancing is the process of realigning your portfolio back to its intended position. We all get a little out of what sometimes in all areas of life, but when it comes to your investment portfolio, I can’t emphasize enough how important it is to bring things back into alignment when it gets out of whack. 

Today, I’m sharing with you how I rebalance portfolios (which I have done literally thousands of times), and how you can follow this same process for rebalancing your own portfolio. 

The first step you’ll need to take when rebalancing your portfolio is reviewing where your portfolio allocation is currently. How much of your portfolio is in stocks? How much is in bonds and cash? That’s the basic criteria. It’s important to look under the hood a little more and check out the percentages you have in each position or holding of yours, and also take a look at how much you have in different industries, small, mid, and large cap, and how much you have in international. I take a look at these things every time I review a client’s portfolio, and it’s important that you look at these areas too. If this all sounds a bit overwhelming though, just start with looking at your mix of stocks and bonds and cash. 

You’re looking for how that current allocation to stocks, bonds, & cash compares to your target amount. So if your target is to have 50% in stocks, but your stock percentage is now 55 or 60%, it’s probably time to rebalance. The rule that I live by is the 5% rule. If the overall allocation to stocks, bonds, and cash is out of balance by 5% or more, it’s time to rebalance. That has served me well over the years. 

If you don’t know what your target asset allocation to stocks, bonds, and cash should be, I’m happy to share with you the age-based asset allocation cheat sheet that we use as a starting place with our clients to determine the right target for each client. I’m happy to share it with you for free. Just send me an email - [email protected], that’s [email protected], and I’ll send along the cheat sheet so you figure out the asset allocation that’s right for you. 

That’s it for today. Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip. 

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