![]() ![]() Volatility in a portfolio means there is also positive skewness. ![]() The more ups and downs an asset exhibits, the greater its volatility. ![]() Volatility measures how much an asset’s price or return rises or falls over time. Stocks are more volatile than other assets. We’re going to focus on why this is so important regarding stocks. Rebalancing allows you to shift your investments periodically to make sure your portfolio as a whole is hitting the target mark in terms of how much risk you are willing to take. Positive Skewness and Faulty EmotionsĪ buy-and-hold portfolio with stocks and bonds will eventually become entirely stock-based because stocks are the higher-performing asset. We’re going to look at what the research suggests regarding rebalancing strategies, and the practical steps you can take to ensure your portfolio is pulling strong for the long run. It all depends on what suits your taste and emotions when it comes to shifting your investments. There are several ways you can rebalance your portfolio. Reallocating funds from overweight assets to underweight assets ensures your portfolio hits the mark-as opposed to becoming one-sided or reliant on the performance of one or two assets. Why exactly should you rebalance? Rebalancing is key when assets in your portfolio stray from their strategic target. While some asset classes can sit tight, such as your real estate or other illiquid investments, your stocks and bonds can greatly benefit from some strategic rebalancing. But rebalancing your portfolio can be easily overlooked, especially if you have a buy and hold portfolio. You know that your portfolio should be diversified-well-rounded, considerate of proper risk, and open to new opportunities. By EMILY BOULTER & David Stein | Updated February 9, 2022 ![]()
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