RE BALANCING ACT

Disciplined investors strive for balance in their portfolios as well. Your asset allocation -- the mix of volatile stocks and more stable bonds -- largely dictates how bumpy your ride will be. A portfolio with 90% exposure to equities is going to feel like being in a Formula 1 race car, while a port...

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Bibliographic Details
Published in:MoneySense (Toronto) 2014-07, Vol.16 (4), p.52
Main Author: Banerjee, Preet
Format: Magazinearticle
Language:English
Subjects:
Asset allocation
Investors
Portfolio management
Portfolio performance
Rates of return
Stocks
Online Access:Get full text
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Summary:Disciplined investors strive for balance in their portfolios as well. Your asset allocation -- the mix of volatile stocks and more stable bonds -- largely dictates how bumpy your ride will be. A portfolio with 90% exposure to equities is going to feel like being in a Formula 1 race car, while a portfolio of 90% high-quality fixed income might feel more like riding in a horse-drawn carriage. Choosing the right asset allocation is likely the most important investment decision you'll make, so it's crucial to get it right. Your target mix of stocks and bonds should be based on your time horizon, the rate of return you need to meet your goals, and your own comfort level with the ups and downs of the markets. In practical terms, rebalancing is a little harder if you buy individual stocks rather than a single fund for each asset class. Stock pickers should consider rebalancing on two levels.
ISSN:1488-1349