FROM OUR INVESTMENT COMMITTEE | Why Rebalancing Your Portfolio Matters
Rebalancing your portfolio is an important step that many people neglect when they try to manage their own investments.
Rebalancing helps keep your portfolio allocated in line with your desired mix of stocks and bonds (and the other factors of return, such as small and value), by taking money from assets that have performed well and reinvesting in assets that haven’t.
Without rebalancing, your portfolio can drift from one level of risk to another as markets change. This drift can add extra unintended or unexpected risk to your plan.
Rebalancing is part of our Design, Build, Protect process (watch this 3-minute video). In the chart below, you can see that the annually-rebalanced portfolio experienced fewer ups and downs over the last 20 years. It may not have soared as high during bull markets, but it didn’t decline as much during bear markets. And overall, it offered slightly better performance and less volatility than a drifting, un-rebalanced portfolio.