Q. I typically rebalance my portfolio every six months but I haven’t done it since COVID started. I know I should but some investments have done so well and I don’t want to sell them, even though I know I’m supposed to. Is it okay to take this kind of chance and not stick to my proper allocation because I think they will keep going up and up?
— Investor
A. We’re glad to hear your investments have been doing well.
But there are plenty of reasons not to hold onto all of the gains.
As you know, it is good practice to regularly rebalance your portfolio to ensure that you are maintaining the proper amount of risk to achieve your goals and that is specific to your risk tolerance, said Jody D’Agostini, a certified financial planner with Equitable Advisors/The Falcon Financial Group in Morristown.
It will help you to maintain the asset allocation that you set up, she said.
“You may invest in several different portfolios, each specific to the amount of risk and time horizon for that goal,” she said. “If your goals or time horizon have changed, then you might adjust the portfolio to account for that.”
It may not increase the return for your portfolio, it will likely reduce the volatility in it and keep it aligned with your risk tolerance, she said. Over time, this can lead to an increase in the returns. It can also help to keep downside losses at a minimum.
“We have had close to 12 years of market appreciation, but markets do not always increase,” she said. “The rebalancing will be appreciated when there is a market correction defined as a decrease of 10% or more.”
Email your questions to Ask@NJMoneyHelp.com.
Karin Price Mueller writes the Bamboozled column for NJ Advance Media and is the founder of NJMoneyHelp.com. Follow NJMoneyHelp on Twitter @NJMoneyHelp. Find NJMoneyHelp on Facebook. Sign up for NJMoneyHelp.com’s weekly e-newsletter.
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