Retirement Mistake No.6: No Rebalancing System for Your Portfolio
Posted In: Retirement Planning for Entrepreneurs

Rebalancing Tires and Money

In Canada, we all know the importance of maintaining our vehicles for winter. Living in Vancouver changes the need for snow tires, but we still need to regularly rotate our tires for maintenance and efficiency. How about your portfolio? How is it rebalanced?

Avoid the pitfalls faced by investors–market volatility, currency risks, rising interest rates, and missed opportunities. Rebalancing on a regular basis can help you stay on track and on the road when things get rough. There are six ways to establish a rebalancing program with your finances. These types of rebalancing can help preserve your capital. The types of rebalancing, or what I refer to as elements of diversification, are:

  1. Periodic (monthly, quarterly, or annual) adjustment of your portfolio mix. 2.
  2. Threshold, as in percentage-based, such as 5% to 8% off target.
  3. Range-based, which adjusts your investments back to certain limits rather than a fixed asset allocation.
  4. Volatility-based, which takes into account the expected range of ups and downs due to markets and types of holdings (high- or low-risk).
  5. Active, which is determined based on markets and results.

Most pension plans in Canada utilize rebalancing strategies to preserve the capital for retirees and maintain payouts based on market conditions. Rebalancing your money can keep you safely on the road to financial success.  Have you checked out our other articles on retirement mistakes? Click here!

Happiness does not depend on outward things, but on the way we see them. – Leo Tolstoy

The art of living lies less in eliminating our troubles than in growing with them. – Bernard M. Baruch


Published with permission from Grant Hicks