Advertisement
Ever planted a vibrant garden, only to have flowers crowd out the vegetables? Just like a flourishing garden needs maintenance, so too does your investment portfolio. Rebalancing keeps your investments in check, maximizing returns and minimizing risk.
Why rebalancing matters
- Maintaining your risk tolerance: Imagine investing with a 60% stock, 40% bond split. Over time, a bull market might push your stock allocation to 70%, increasing your risk exposure. Rebalancing brings it back to your target asset allocation.
- Higher returns over time: As our example with investors A and B shows, rebalancing can lead to greater returns over the long haul. While A’s unbalanced portfolio might outperform in a bull market, B’s rebalanced approach offers stability and potentially higher returns over the long term.
- Reduced volatility: Rebalancing acts as a safety net, mitigating the impact of market fluctuations. During a bear market, B’s rebalanced portfolio would likely weather the storm better than A’s unbalanced one.
Rebalancing made easy:
- DIY approach: Discipline is key. Regularly review your portfolio and rebalance as needed to maintain your target asset allocation.
- Multi-asset allocation & balanced advantage funds: These professionally managed funds automatically adjust your asset allocation between equity and debt, saving you the hassle of manual rebalancing.
Invest smart, reap the rewards
By incorporating rebalancing into your investment strategy, you’ll be well on your way to a flourishing financial future. Diversification is key! Rebalance regularly, and watch your investments grow steadily over time.