Time to Tune Up the Portfolio

Creating a portfolio that places a percentage of your money in assets such as equities, bonds, commercial property and so on is a tried and trusted method of diversifying your risks. But as prices move, the percentages will shift as some assets rise in price and others decline. Thus we need to adjust our strategy with the change in situation. Rebalancing is the process of realigning the weightings of one's portfolio of assets. Rebalancing involves periodically buying or selling assets in your portfolio to maintain your original desired level of asset allocation.

i. Significant Life Events:
Regardless of when you last evaluated your portfolio, you should take a fresh look at your savings accounts if a major event in your life results in changes to your investment goals.

ii. Major Losses:
It is a good idea to rebalance your portfolio if you unexpectedly lose a significant sum of money. For example, a major move in the financial markets that results in a 10 percent to 20 percent loss should trigger a reevaluation of your investments. If your portfolio's value has suddenly gone down to a level where you cannot tolerate additional losses, adopt a safer strategy.

iii. Periodic Checks:
Even in the absence of major personal events or significant losses, you should periodically rebalance your portfolio to ensure you are getting the most for your investment dollars. Some financial experts suggest making quarterly adjustments to account for changes in the stock market. If the market starts slumping, you might want to move more money into cash accounts. If the stock market has been gaining, you might want to invest in more stocks. It's a good idea to at least check your investments thoroughly once per year. This will give you a chance to see how your investments have been performing and make adjustments accordingly.