Skip to main content
No. of Recommendations: 0
I recommend a rebalance every 18 months or so. More often than that, and you may be running up costs/taxes unnecessarily. Less often, and your original asset allocation will probably have changed dramatically.
You don't want this to happen unless your goals and risk tolerance have changed. Many experts opine that correct asset allocation is the most important factor in investment success.

If you originally decided a mix of, say, 70% stocks/20% bonds/10% cash was consistent with your goals/risk tolerance, then you want to stick with that. Since stocks will normally outperform bonds and cash, stocks are gradually going to consume a higher percentage of your portfolio. Since stocks' greater returns are predicated on higher risk, you are increasing your risk over what you originally decided it should be, if you are not rebalancing regularly.

As to keeping an eye out for taxes, two strategies to use are: 1) rebalance by putting new money into the underfunded categories, rather than selling your winners, and 2) if you do sell some winners, you may also want to sell some losers to offset your capital gains.

Thanks!
Joe
Print the post  

Announcements

The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.