Is it time to rebalance?
Most of us believe in balance. In sports, a balanced stance keeps you ready for the next point. In conversation, a balance between listening and speaking keeps both you and your friend engaged. And a balanced diet means that a mix of protein, fats, and carbs can give you the energy and nutrients you need.
So it makes sense that a balanced portfolio will help financially. A mix of domestic and international stocks, bonds, and cash—tailored to your specific situation—should give you the return need consistent with the risk you can handle. But portfolios don’t manage themselves. Over time, they get out of balance. This can happen if one part grows and another area languishes.
That might be the case, now. US stocks have been on a tear—up 30% this year, 15% the year before, hitting new records. For many international markets, though, it’s another story: apart from Japan, Asia was down last year, as was much of Latin America. Taking a little from your winners and adding to areas that haven’t done so well isn’t just prudent; it also gives you a disciplined way to buy low and sell high.
Rebalancing financially may only involve incremental adjustments. But it’s a good way to be ready for the next challenge. Because in finance, like life, there’s always something new coming.
Douglas R. Tengdin, CFA
Chief Investment Officer