6 Jun, 2021

Do you rebalance your portfolio?

If you rebalance your portfolio how often do you do it? What are the reasons that you rebalance? I got to thinking more about this after reading an article in the Wall Street Journal this morning.

The case for rebalancing is pretty straightforward. Over time, assets whose prices rise account for a growing proportion of a portfolio’s overall value, and those whose prices fall amount to a shrinking share of the portfolio. Rebalancing, by selling securities that have risen in value and buying assets whose value has declined, restores the investor’s desired weighting of various assets within the portfolio.

“For some, it is an emotional anchor,” says Richard M. Rosso, director of financial planning at wealth-management company RIA Advisors.

Part of the logic behind rebalancing is that it maintains the level of risk the investor is comfortable with, by ensuring that the portfolio doesn’t skew too far beyond the desired balance between relatively safe investments like highly rated bonds and riskier assets like stocks

Wall Street Journal

It’s also been on my mind because last Friday I sold my position in Nordic American Tanker (NAT) and purchased a position in CrossAmerica Partners (CAPL). My swap of holdings wasn’t to rebalance for diversification but to rebalance for income after NAT cut their dividend.

What do you do and why?

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About : Kevin Bae

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