By: Laura Walton AFC®
We talk about life balance, a balanced diet, balancing work and play, the balance of nature. Now’s an important time to talk about balance and our investments.
All too often investor behavior hurts us when making buying and selling decisions. We get excited and buy when we see a stock’s value rising and dump investments when we see them losing value. By contrast, re-balancing your portfolio regularly forces you to do the opposite; it forces you to buy low and sell high.
We recommend re-balancing your investments at least annually. This means selling off those investments that have out-performed while buying more of other investments that have lagged. This chart shows the change in value of a likely portfolio between 12/31/16 and 12/31/17. Note – it was a good year, all asset classes shown increased in value. Still, some increased more than others and that’s the imbalance you’ll want to neutralize.
You’ve likely made a commitment to increase balance in your life this year – don’t leave out your investments!