Have you ever noticed that a portfolio that’s performing well can actually become riskier over time?
That’s one of the reasons investors rebalance.
When certain investments outperform others, they begin to make up a larger percentage of your portfolio. For example, if stocks have a strong run, your portfolio may become more heavily invested in stocks than originally intended.
Rebalancing is the process of bringing your portfolio back in line with your target allocation. It typically involves trimming positions that have grown beyond their intended weight and adding to areas that have lagged behind.
While it may feel counterintuitive, rebalancing encourages investors to systematically sell high and buy low. More importantly, it helps ensure your portfolio’s risk level remains aligned with your financial goals and time horizon.
The purpose of rebalancing isn’t to maximize returns — it’s to manage risk and maintain discipline through changing market conditions.
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Bautis Financial LLC is a registered investment advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.
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