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Online Investing Hacks by Bonnie Biafore

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Hack #75. Keep Allocation in Line

Keeping your asset allocation on target means adjusting how much you own of each holding as investments grow or shrink.

Experts often advise investors to stay in the market for the long haul and warn that changing in vestments leads to losing ground. However, maintaining your target asset allocation [Hack #74] requires some changes to your investment, because markets experience ups and downs that translate into gains in some areas of your portfolio and losses in others. Realigning your portfolio to its target asset allocation at the beginning of each year mends the effects of assets performing differently. If you build a portfolio [Hack #73] in your personal finance software or at some web sites, you can use software and online tools to figure out the adjustments you need.

How Often Should I Rebalance?

Rebalancing your allocation is like going to the doctor for a physical. If you don’t go regularly, your health might be in jeopardy. Likewise, if you don’t review your portfolio from time to time, your asset allocation eventually becomes unbalanced, which could mean insufficient returns or unacceptable risk. If you’re struggling to find New Year’s resolutions, add checking your portfolio to the list. Checking your portfolio once a year is sufficient. Don’t make yourself crazy or incur unnecessary commission costs because your allocations are a few percent away from their targets. If your target stock allocation is 50 percent and your portfolio ...

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