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. 

A recent Vanguard study actually quantified the impact of rebalancing vs. just letting things ride in your portfolio, and they found that rebalancing adds about .26% a year in returns. While that seems like a small amount, over a lifetime of investing it can be as much as 6-figures in portfolio value. 

And I’m glad you’re with me today, because it’s probably the most important rebalancing tip of the week, and it’s also the easiest to understand. 

If you haven’t rebalanced your portfolio recently - and by recently I mean in the last year, 3 years, 5 years or longer - it doesn’t really matter. Chances are that if you haven’t been paying close attention to your portfolio, it’s way out of whack. Why? Well, the last 10 years have seen a 300% gain in the stock market and an even bigger gain in certain stocks and industries.

We are now officially in the longest economic expansion in the history of the United States. If you do not take this opportunity of tremendous growth that you’ve likely had in your investment portfolio to review your current allocation to stocks, bonds, and every position in your portfolio and ask yourself if that mix is right for you at your current age and stage in life, you are playing with fire. 

I don’t know when the next recession will be, and how deep the next stock market downturn will be, but I do know this - it will happen. And the time to rebalance is when the seas are calm and you can sell your bloated positions, bring everything back into alignment at or near a high water mark in your portfolio. 

If you wait too long, and you don’t do it before the next major market downturn arrives, you miss your opportunity. So take the time this week to review your portfolio. Look at your current mix of stocks and bonds, and the current positions you own and determine if any of it is out of whack, and rebalance if necessary. 

That’s it for today, but before you go, would I be correct in saying that your retirement is perhaps the most important financial decision you’ll ever make? You want to get it right. Well, so do I. For the last 12 years, I’ve been helping clients just like you make the transition into retirement. If you want to talk one-on-one with me about whether or not you can retire, head on over to truenorthra.com, where you can book a 15 minute call with me, at a time that’s convenient for you. The call is confidential, free, and I promise to help guide you on whatever is weighing most on your mind right now regarding your retirement. So head on over to truenorthra.com and book a call today. 

Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip. 

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