Retirement Plan - Employees

Rebalancing Your Portfolio

By February 6, 2017 No Comments

As a participant in the company’s retirement plan, you are already serious about saving for your future. Whether you are retiring in a few weeks or a few decades, you may need to protect your investment. A healthy way to do this is to rebalance your portfolio.

What is rebalancing?

Rebalancing is simply readjusting your portfolio back to the original asset location that took into account your risk tolerance and time horizon. Put another way, rebalancing forces you to adhere to your investment strategy.

You rebalance by selling assets that make up too much of your portfolio and use the proceeds to buy back those that now make up too little of your portfolio. The net effect is to “sell high and buy low.” Ultimately, regular rebalancing can increase the overall return of your portfolio over time.

EXAMPLE: 
Suppose you enrolled in the plan at the beginning of last year and allocated 40 percent of your portfolio to bond funds and 60 percent to equity funds.  Further suppose that when you go your year-end statement, it shows that 70 percent of your assets are in equity funds and 30 percent are in bond funds. 

To stay within your acceptable risk level (which is what you determined before entering into the plan), you should sell enough equity funds to bring that back to 60 percent of your assets and buy enough bond funds to bring them up to 40 percent of your assets.

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If you have questions about rebalancing your portfolio, please contact your retirement plan consultant, Rathbone Warwick Investment Management. Call (208) 297-5445 or [email protected].

 

 

 

Source: Principal Financial Group
ACR#207478 09/16
Rathbone Warwick Investment Management (“The Firm”) is a Registered Investment Adviser. This document is solely for informational purposes. Advisory services are only offered to clients or prospective clients where the Firm and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal. No advice may be rendered by the Firm unless a client service agreement is in place.