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Asset Allocation and Rebalancing Strategies

Asset Allocation and Rebalancing Strategies

December 01, 2023

Finding the right investment allocation can be difficult and will vary based on individual preferences such as risk tolerance, time horizon, and tailored investment goals. Rebalancing an investment portfolio ensures that the portfolio is returned to the original risk profile desired by the client. Due to varying returns as market fluctuations arise, certain asset classes may shift up or down in their percentage makeup of your portfolio. In the practice of rebalancing, often, investors will either use new money to reinvest in asset classes that have fallen in percentage of portfolio makeup or sell some of the "winning" assets and use that money to buy more of the underperforming assets, in efforts to buy low and sell high at a later date.  

To read about rebalancing practices:

Rebalancing Your Portfolio´╗┐

To read about asset allocation strategies:

Diversification, Patience, and Consistency´╗┐

One of my favorite Warren Buffett quotes is, “Remember that the stock market is a manic depressive.”

What he’s suggesting is that stock prices can sometimes swing wildly from day to day in response to even minor news. One moment stocks can celebrate comments from a Fed official, and hours later, they can vilify the most inane data points.

Buffett concludes it’s more important to keep an eye on your future and ignore short-term market movement.

You may have also heard of Sir John Templeton, the legendary mutual fund manager who pioneered international investing. He intentionally read The Wall Street Journal a few days late to avoid emotional decision-making based on a headline.

So take a lesson from two of the best. Avoid riding Wall Street’s daily roller-coaster so we can focus on what’s ahead.