Prajna Capital - An Investment Guide

It's vital to revisit and monitor your portfolio at least annually to check on the status of your allocations and make sure your investment funds are performing as expected. Why? Here's the rebalancing 'problem' in a nutshell. Let's assume you're an investor with a portfolio that includes $100,000 in stock funds (50 per cent of the portfolio) and $100,000 in bond funds (the other 50 per cent). For simplicity's sake, let's say the stocks have doubled in value to $200,000. Note, however, that your portfolio's asset allocations are now 67 per cent in stocks and 33 per cent in bonds, a 17 per cent deviation from your original portfolio. Depending upon your stage in life and your financial plan, this happy development may mean it is time to rebalance. When is it time to rebalance your portfolio ? Long-term investors should only rebalance when truly necessary, for example When significant gains (such as those from the bull market) or major losses have sk...