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Portfolio Rebalancing and Reconstruction

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Congratulations on starting your investment journey. However, you still have to monitor the assets in your portfolio so that they are neither overperforming nor underperforming. How do you do this?

Portfolio rebalancing is the key. Learn all you need to know about portfolio rebalancing by reading this article.

What Is Portfolio Rebalancing?

Portfolio rebalancing is the process of realigning the proportions of assets in your investment portfolio. Over time, some investments grow faster than others, causing your portfolio to drift from its original allocation.

Rebalancing helps maintain your desired level of risk and ensures your investments align with your financial goals.

When you are ready to rebalance your portfolio, go to the “Portfolio Reconstruction” page on the Assessworth platform.

5 Tips to Rebalance Your Portfolio

1. Set a Rebalancing Schedule

Decide how often you will review and rebalance your portfolio. Many investors do this annually, semi-annually, or quarterly. Regular scheduling prevents emotional decision-making and ensures your portfolio stays on track.

You can also rebalance when your portfolio’s allocation deviates significantly from your target. This allows you to respond to major market shifts while maintaining control over your investments.

2. Set Your Initial Portfolio Allocation Target

Determine the percentage of your portfolio you want to allocate to different asset classes, like stocks, bonds, and real estate. For example, you might choose 60% stocks, 30% bonds, and 10% real estate.

Having a clear target helps you measure when your portfolio drifts from its intended balance. It also serves as a guide for rebalancing decisions.

3. Consider Dollar-Cost Averaging

Dollar-cost averaging means investing a fixed amount of money at regular intervals, regardless of market conditions. This strategy can help you rebalance gradually without needing to sell large portions of your portfolio.

It also reduces the risk of investing a large sum during a market high. By spreading investments over time, you can take advantage of both rising and falling markets.

4. Always Monitor How the Market Affects Your Portfolio

Markets fluctuate, and these changes can significantly affect the value of your assets. Regularly check how market movements impact your portfolio’s allocation.

Monitoring helps you identify when rebalancing is needed. This ensures your portfolio stays aligned with your risk tolerance and investment goals.

5. Reassess and Adjust Your Goals If Needed

Your financial goals and risk tolerance may change over time. Life events like a job change, marriage, or nearing retirement can impact your investment strategy.

Revisit your goals periodically and adjust your portfolio allocation if necessary. This keeps your investments aligned with your current priorities and financial situation.

Conclusion

Useful insights right? Remember that to rebalance your portfolio, you have all that you need in the Assessworth platform.

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