From
Your Perspective:
Managing your 401(k) portfolio
Time to rebalance?
Without too much practice, you can learn to recognize the signs that it’s time to rebalance or reallocate your portfolio and can choose among the alternatives for handling the task:
1.
If some investments have outperformed others, the stronger performers will make up a larger percentage of your portfolio. You might want to direct more of the new money going into the account to the underperformers to bring the overall allocation in line with your original plan.
2.
If some of your investments don’t
measure up to their appropriate
benchmarks,
or if you change your approach to investment
risk,
you might reallocate to bring your portfolio more into line
with your expectations. Alternately, you may have to recognize
that your original expectations were unrealistic or that your
portfolio was not adequately
diversified.
3.
Over the years you might
reallocate because you’re following a specific investment
strategy, such as seeking strong, long-term growth early in
your career and shifting more of your
assets
to
fixed-income
securities as you approach retirement.
Most experts recommend that you reallocate your portfolio once a year. Responding to every short-term fluctuation in the market isn’t compatible with meeting long-term goals. And constant buying and selling means larger trading costs are being subtracted from your account value.
