Pattie Lovett-Reid: Rebalancing your investment porftolio
Published Thursday, August 21, 2014 8:32AM EDT
Last Updated Thursday, August 21, 2014 10:49AM EDT
With the TSX up well over 13% on the year, can you have too much of a good thing? - stocks in your portfolio? Should you consider re-balancing it?
- Yes if you started the year with 60% in stocks and 40% in bonds, it is likely out of balance, and while it seems counterintuitive, you should sell out of some of your winners and buy more of your losers - bonds. It is all about the asset allocation and that is what drives your returns.
Why does it make sense to do this if the markets keep charging higher?
- Because no trajectory is straight up and the markets will correct – we just don’t know what the catalysts will be for the pull back.
- September and October tend to be tough months for the markets, so why not move to the sidelines entirely?
What are some on the common investment mistakes people make?
- They don’t pay attention to asset allocation.
- They start to believe their own predictive powers.
- They don’t have a plan and if they do, they have one they don’t stick to it.
- They can have a herd mentality – if everyone else is getting into a stock, I guess I should too.