How To Know When To Rebalance Investments?

By | February 27, 2014

rebalance investments

Getting your investment portfolio right, is something that you will need to consider. The proportions of your investments need to have the right balance for your capital, you have taken into consideration your age and the length of time to invest.

Wikipedia suggests, ‘(T)he rebalancing of investments is the action of bringing a portfolio that has deviated away from one’s target asset allocation back into line.’

But all the money in the world cannot make you happy either, so there has to be a balance.

Heidi Klum

Why rebalance

It is important to make sure that you have the correct balance of your portfolio, so, you are making the right choices for your long term investment plans. To re-balance your portfolio it is often called Constant Mix Strategy. This is just one of the many options that you should consider with your portfolio, in an oscillating market this is the best performer. This is because it is constantly looking at the balance and readjusting according to the market conditions.

There are many other personal reasons that you might want to consider the rebalance of a portfolio. You need them to meet your needs, as your needs change so, too, does the needs of your investments. They need to reflect your needs, your age and the risk that you are prepared to take.

Circumstances change and these changes need to be reflected in the investments you hold. But, also, the markets change too, you need to be prepared to look at the options that you have and make judgements as to the long term positions with these.

The reasons to re-balance

One of the main reasons you need to rebalance your portfolio could be the amount of risk that is present in your current portfolio. If the risk is not within your comfort zone, then you could be jeopardizing your capital or your growth. The reasons can come from both ends of the spectrum, where the risk in your portfolio is too high, this can cause the potential to risk a higher proportion of capital, or from the other end, where the risk is too low. The returns that are predicted are falling short of your requirements.

Therefore, the markets can work better for you, with a rebalance of your investments.

But, when you are considering a rebalance, you need to consider your options and you need to plan accordingly. There is little point in just selling or purchasing to get the spread of the investments to the right proportions. You need to consider the best value for your money, this is why it is important that you discuss and implement an adjustment plan. It will look at the requirements over a long term approach, this enables you to take advantage of the markets and the current situations, ensuring, you are making the best investment choices possible.

When to rebalance

There are many different opinions, as to the best times to look at your investment plan, many people suggest anywhere from one to two years. It is important that you make the right choices at the right times for you. Keeping in contact with the professionals that manage your portfolio, they will know when the time is right, to re-balance according to your needs.


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