You keep hearing of the need to rebalance your investment portfolio. But is it truly necessary?
We know of suggested formulae: Keeping the ratio of stocks and bonds in your portfolio at 50%/50% or 60%/40%, and so on. I will not get into what is optimum because that is a variable, depending on many factors.
You hear about periodic rebalancing when that ratio changes due to market changes. Question: How does it improve your investment success?
The truth is, rebalancing the ratio of stocks and bonds is one of over 1500 investment strategies I have investigated. It has not always been a profitable strategy for all types of stock or bond markets. It can cause overall losses, as it did in the 2008 and 2009 financial meltdown and in some past cycles.
My suggestion is to evaluate your common stock and bond holdings in a flexible manner and not as a set ratio, depending on your age, total assets and retirement outlook.
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