Portfolio Rebalancing: The 5 Biggest Pitfalls and How to Avoid Them
Stay Wealthy Retirement Podcast
Taylor Schulte, CFP®
4.7 • 678 Ratings
🗓️ 16 February 2021
⏱️ 21 minutes
🧾️ Download transcript
Summary
Today I'm wrapping up our mini-series on Portfolio Rebalancing.
Specifically, I'm sharing the 5 biggest pitfalls to watch out for.
Why?
Because making just one of these mistakes could wipe away the benefits of rebalancing entirely.
So before you process your next rebalance (or let a computer handle it!), tune in to learn what they are and how to avoid them.
Transcript
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| 0:00.0 | Welcome to the Stay Wealthy Podcast. I'm your host, Taylor Schulte, and today I'm wrapping up our mini series on portfolio rebalancing by sharing the five biggest pitfalls that you need to watch out for. |
| 0:16.0 | In fact, making just one of these mistakes could wipe out all the benefits of rebalancing entirely. |
| 0:23.6 | Links and resources for this episode can be found by going to you staywealthy.com forward |
| 0:29.2 | slash 97. And just like last week, we are not going to waste any time today. So as a really |
| 0:35.6 | quick recap from part one, portfolio rebalancing is the process of |
| 0:40.6 | bringing your asset allocation back to the target percentages that you or your financial advisor |
| 0:46.8 | have established. Asset classes in your portfolio, the underlying investments in there, |
| 0:52.5 | they don't all move in the same direction. At least |
| 0:55.7 | they shouldn't if you're properly diversified and you have a well-constructed portfolio. |
| 1:01.2 | So from time to time, you or your financial advisor will need to put the puzzle pieces of |
| 1:06.9 | your portfolio back together again to ensure that your investments continue to match up |
| 1:12.7 | with your retirement plan and your risk profile. Forgetting about your investments, |
| 1:18.7 | well, you know, it can be good from a behavioral perspective, right? Take the long-term approach, |
| 1:23.6 | ignore the noise, don't make short-term irrational decisions. You know, forgetting about your |
| 1:29.0 | investments can be good from that perspective, but really just absolutely neglecting your |
| 1:34.4 | investments and not rebalancing can cause a lot of long-term problems and in some cases |
| 1:40.1 | could even put your retirement in jeopardy. As a reminder, the two main benefits of rebalancing that I talked about are, number one, |
| 1:48.2 | maintaining your desired risk level and asset allocation, and number two, boosting |
| 1:54.3 | long-term investment returns by rebalancing between asset classes that have similar risk |
| 2:00.7 | return profiles. For example, |
| 2:03.2 | large cap growth stocks and international stocks, rebalancing between those two asset classes |
| 2:07.9 | with similar risk return profiles, research is shown can actually boost long-term returns. |
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