Rebalancing Your Investment Portfolio

This is an excellent article on the potential benefits of rebalancing and maintaining a disciplined approach to portfolio management and investment policy.  Rebalancing to a predetermined asset allocation (which necessarily results in selling high and buying low) can both reduce risk and even add additional return as shown in the article.  The results given in the article validate HFA’s investment methodology and belief that a long-term, disciplined approach to investing (rather than taking a short term view by attempting to time the market or chase performance) has the greatest likelihood of helping clients achieve their financial goals.

Article by Robert Brokamp of The Motley Fool

How would you like $4,290,387? It’s easy! Just go back to 1972 and invest $100,000 into a well-diversified portfolio. Not enough money for you? Well, then, here’s how you can add $334,124 to that tidy sum: Simply rebalance this well-diversified portfolio annually.

Okay, despite my fondness for Marty McFly, there’s no way to travel back 38 years and open a brokerage account. But the past few decades may provide clues about the next few, especially regarding portfolio behavior and the value of rebalancing. Below, we’ll look at three common beliefs about rebalancing and explain whether they’re true or false — and why.

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