You can rebalance your portfolio in different ways to bring the way it is allocated back in line with the balance you intend it to have.
One rebalancing strategy is to redirect money to the lagging asset class until it returns to the percentage of your total portfolio that it held in your original allocation. Or, you could add new investments, and concentrate your contributions on that class.
Another strategy is to sell off a portion of your holdings within the asset class that is outperforming others. You may then reinvest the profits in the lagging asset class.
All three approaches work well, but some people are more comfortable with the first two alternatives than the third. They find it hard to sell off investments that are doing well in order to put money into those that aren't. Remember, though, that if you invest in the lagging classes, you'll be positioned to benefit if they turn around and begin to prosper again.
|
