Tuesday, January 19, 2021

When should you rebalance your portfolio


In January, most financial analysts recommend rebalancing your portfolio. This means that, since this was a good year for stocks, most of us have more stocks in our portfolio than, perhaps, we should. This means the painful process of selling stocks to buy, typically, bonds or bond funds. Bonds and savings accounts are paying measly levels of dividends and interest so the temptation may be to "let em ride". This works in movies during the roulette table scene but is less successful in real life. What goes up must come down, and that includes stocks. 

The question is when. Ideally you should sell stocks when they are high and buy when they are low. This can be hard to do, however. Most of us buy when things are high and try to sell when the price goes down. It's like buying Elvis Presley memorabilia ten years ago and trying to sell them now, when most Elvis fans are starting to die off. Timing is always important in these things. 

Here are some ways I determine when it is time to sell some of my stocks or stock oriented mutual funds. :

When the flowers are falling off of my Christmas cacti.

When I open a container of milk and it has curdled.

When Channel 13 has another fundraiser.

When I run out of AA batteries. 

When my smoke detector starts beeping.

As you can see, the time to rebalance a portfolio can appear to be somewhat arbitrary. It's easier to buy em and hold em. 

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