Consider risks when changing your investment allocation

The article reprinted below raises good issues on risk, asset allocation and rebalancing your investment portfolio.

The author asks us to remember how we all felt a year ago (if you want a good video reminder, try this video: Wall street one year later.

Then, as you think of the risks you took staying invested, he suggests that you need to remember that feeling now, when you consider taking on any more risk, e.g., adding to stocks.

One of his best comments he makes is that you should be rebalancing your portfolio at key points in time.

If you stayed in equities or bought more at the beginning of this year, you actually need to trim back now, because the recent gains mean that you are over-weighted in stocks and need to sell and buy investments that did not do as well to maintain your asset allocation.

Over time, rebalancing can be a technique that helps to get you out of investments at the top, when others want to buy, and into investments at the bottom, when others want to sell. In other words, the stock market gains are more a sign to trim that to add…..

Let me know if you have questions or comments …. Thanks,

Steven