Understanding Portfolio Rebalancing
Regular portfolio rebalancing is crucial for maintaining your desired investment risk level and achieving long-term financial goals.
Why Rebalance Your Portfolio
Market movements can cause your asset allocation to drift from your target percentages, potentially exposing you to more risk than intended or reducing potential returns.
When to Rebalance
Most investors rebalance their portfolios annually or when allocations drift significantly from targets. Some prefer quarterly rebalancing for tighter control.
Tax Considerations
Consider tax implications when rebalancing taxable accounts. Using new contributions or rebalancing in tax-advantaged accounts can help minimize tax impact.