Rebalancing Your Stock Portfolio? Luck Matters.
If you're like a majority of investors, you probably hold more than one security in your portfolio. Maybe you equal-weight a basket of 30 high-quality stocks. Perhaps you're nearing retirement and are considering the classic 60/40 portfolio -- one that allocates 60% to a broad-market equity index fund, like State Street's S&P 500 ETF Trust (NYSEMKT: SPY), and 40% to a total bond fund, like Vanguard's (NASDAQ: BND).
Regardless of what you hold, you likely have a target allocation in mind that you want to maintain. To do that, you rebalance your portfolio at fixed intervals -- selling outperforming investments and buying underperforming ones every month, quarter, or year -- so that your investments are reset to their original allocations.
You might be left wondering, however, if your systematic approach to rebalancing is enough to curtail the effects of luck on your portfolio's performance. Does it matter when you rebalance? And if so, what can you do about it? Let's dig deeper.
Source Fool.com
