Reviewing Investments Annually

Re-balancing an investment portfolio?

When it comes to rebalancing an investment portfolio in today’s economic arena it can be very confusing to choose the right method. Most money-management firms and independent financial advisors use different rebalancing strategies so it’s important to know what approach they use and how often. I also find that many investors focus on their investment holdings and performances, which are important, but remember to keep in mind that you may need to consider rebalancing occasionally. Specifically, pay extra attention to those investments that are designated for long-term planning or are being used for current income. Typically the longer the investment horizon the greater risk the portfolio can drift.

Let’s first look at what we mean by rebalancing. Rebalancing, typically consist of adjusting an investments allocation to meet the risk level and objectives of the target asset allocation. Due to market ups and downs, an allocation can drift either becoming more risky or more conservative. This is important to know because it can change how the portfolio may perform as well as shifting the investor’s objectives. For example, if a portfolio became more weighted in equities then it may provide for more growth but can also increase downside risk. On the other hand, if a portfolio shifted too conservatively then it may reduce the potential growth in the portfolio, limiting opportunity.

Some financial advisors seek to rebalance quarterly, every six months, or annually. Others may use a percentage change in the portfolio as a trigger to rebalance. For example, if a portfolio shifts more than 5 % or 10% the advisor or institution may re-adjust the allocation. There is no particular correct method, but having a strategy is a way to help keep your investments in-line with their original purpose. Like any strategy, choose a method that works for you and try to stick with it. This can help to stay objective about your investments and not let emotions influence decisions.

Keep in mind, rebalancing is only one aspect of monitoring a portfolio but it can be a critical piece if over looked for long periods of time. Of course, investors may have different styles of investing so working with a financial professional may help investors plan properly, including implementing a rebalancing strategy.

(No investment strategy, including asset allocation, or rebalancing can guarantee a profit or protect against loss in declining markets. The process of rebalancing portfolios may carry tax consequences so consult with your tax professional).


Michael Cochell is the Associate Vice President of Jacob Gold & Associates Inc. Contact him at 480-998-4653 or by email at


About Michael Cochell

Michael Cochell is associate vice president of Jacob Gold & Associates. For the last 14 years, Cochell has helped thousands of households organize and manage their personal financial affairs in the areas of banking and finance. He is an investment adviser representative and is registered with FINRA and holds Series 7, 63, 65 licenses, and is a graduate of Arizona State University.