Research out of Investment Company Institute found that 11% of investors have not rebalanced their investments in the last five years. As the US stock market continues its bull run, the value of US stocks represent a larger and larger portion of the portfolio.
All of a sudden, a portfolio that was balanced five years ago could be taking on more risk than you originally planned. Money Magazine states that a portfolio in 2009 invested 60% in stocks and 40% in bonds may have a current mix of 75% stocks and 25% bonds. If you’ve not looked at your portfolio over the last few years. Now is a great time to get started. Here is a summary of steps to take:
1) Gather all of your statements – Investments accounts with us, accounts held elsewhere, 401(k) statements, etc. Tally up your overall asset allocation.
2) Find what looks out of line – Does one mutual fund represent more than 25% of the portfolio? Does one stock represent more than 10% of the portfolio? Is one asset class accounting for a large portion of the portfolio?
3) Look to rebalance – identify the appropriate asset allocation (primer found here). You may also want to spend some time developing an asset location strategy, if we haven’t guided you already.