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I'm your host, James Canole, and this is the podcast dedicated to helping you retire well.

It all starts right here on Ready for Retirement. for retirement.

Hi, everyone, and welcome back to another episode of Ready for Retirement.

I'm your host, James Knoll.

On today's episode, we're going to talk about something that can seem fairly basic when you look at it at very high level, but actually is really important.

And actually there's some nuances to it that most people, I don't think, fully take into account.

So today's episode is all about rebalancing.

And it's based upon a question that came in from Dave.

Dave said this.

He submitted a question and said, if I am diversified in an all-stock portfolio in the market tanks, do you continue to rebalance your portfolio to your original diversification?

I hope that makes sense. Let's say your large-cap growth stock goes down 30% and your international

stock is flat. Do I rebalance to add a greater amount to large-cap growth because my portfolio

would be outside of my original diversification. Thank you for your time.

All right. Well, Dave, thank you for that question. And I think with this question, there's going to be a

straightforward answer. And then there's going to be a more nuanced answer. And so we'll explore both of

those. So let's start with this. Why do we rebalance in the first place? Well, we rebalance because it helps to keep

the risk parameters of our portfolio in place. Typically, if you're going to have a portfolio,

let's say it's 50% stocks, 50% bonds, just use a simple example. If you never rebalance,

and let's say you started that 50-50 portfolio in 2009 at the beginning of the bull market that we're currently

in. Well, if you had started then, your portfolio would definitely not be a 50-50 portfolio

anymore. But 50-50 portfolio is very pretty balanced. You might call it slightly above

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