Chapter 11. Monitoring Your Portfolio: Rebalancing and Other Smart Strategies
Designing and building your portfolio isn't the end of the asset allocation recipe we work at perfecting throughout this book. To keep delivering the appetizing portfolio results you desire, you need to do diligent maintenance to make sure your portfolio stays true to your recipe.
Your portfolio should be monitored for several reasons. You may need to replace individual securities that lose their luster. Taxes are always a part of the investing picture, so you can be sure that tax considerations may also dictate some remedial action. And, perhaps most important, your portfolio can drift away from its intended allocation due to the vagaries of the markets and occasionally need to be brought back to target by rebalancing on the right schedule.
In this chapter, we go through a helpful step-by-step rebalancing exercise with our fantastic fictional financial friends John and Jane Doe. We look at the details of how they rebalance their portfolio, so that you can understand how rebalancing can work for you and get you the benefits you deserve. We also show you a few other hands-on strategies, beginning with the importance of keeping tabs on the individual securities you own and always being aware of certain tax-driven opportunities, such as timing the sale ...
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