Over the past three years the S&P 500 has gained an average 13% annually while U.S. bonds have returned around 6%. If you haven’t done much with your stock portfolio your target asset allocation is probably out of whack. One way to restore your optimum asset allocation is to rebalance your portfolio.
What is rebalancing? Rebalancing is the process of buying and selling portions of your portfolio in order to set the weight of each asset class back to its original state. Also, if your investment strategy or tolerance for risk has changed, you can rebalance your holdings to readjust the weightings of each security or asset class in the portfolio to fulfill your newly desired asset allocation. Doing so could help lower risk and could boost performance.
How much will it help? Estimates vary, but you can check your portfolio using these handy calculators. The names are kinda cryptic, but the calculators work.
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