Rebalancing Your Assets

If you are regularly investing, then you’re doing good things for your finances and for yourself in general! So many people in today’s world don’t take the time to invest, which means that they don’t allow their money to grow and work for them in all the ways that it could.

However, just investing your money and then stepping back and not being involved is not the answer! After you have made investments, you’ll want to check up on them regularly to see how they’re performing. You may want to get rid of some investments, take on some new ones, and also make adjustments and re-balance investments in order to minimize risks.  

Regularly checking in on investments and making changes as needed is all part of being an investor, but knowing what changes to make and when can be a bit tricky, especially if it’s all new to you. That’s why we’ve provided some simple tips for re-balancing your assets smartly.

Tip #1: Aim for an Asset Allocation You Feel Good About

Your asset allocations will often shift and change as investments grow and change themselves. Thus, sometimes, you end up with an asset allocation you’re not entirely comfortable with. This could also happen through poor planning. Whatever the reason, if you end up with an asset allocation that’s too risky for you or otherwise makes you unhappy, some re-balancing is definitely in order.

When you re-balance for this reason, do so with the goal of developing an asset allocation you feel comfortable with and that doesn’t involve too much risk. If you’re unsure how to drive your risk down, then you may want to speak with an investment adviser for assistance.

Tip #2: Think About Your Taxes

It’s important for you to remember that many of the decisions you’ll make during re-balancing will have some kind of an effect on your taxes. For example, when you sell taxable assets that have increased in value, you’ll probably have to pay a capital gains tax.

You can minimize such taxes by selling off lower performing securities or choosing to hang on to certain assets for longer. A good asset management adviser can also supply you with more strategies for getting your assets back in balance without driving up your tax bill.

Tip #3: Time it Right

Finally, it’s important to understand that it is extremely possible to re-balance your assets TOO much. If you panic and re-balance every time there is some kind of tax change or stock market surprise, you’re going to end up paying way too much in fines and fees.

Instead, get set up on a regular re-balancing schedule. How often you should re-balance will depend on your needs and goals, but having a regular routine will keep you from making panicked decisions and from paying too much in fees.

As you can see, re-balancing your assets is complex, but with the right help and adherence to these tips, it can be done!