Here's a piece from CNN Money that asks whether you should rebalance your portfolio or not. Their thoughts (FYI, this piece was published at the end of 2013, hence the numbers below are not for 2014):
Rebalancing your portfolio has long been investing orthodoxy, yet it has never been easy.
Shifting money from winning funds into laggards is counterintuitive, even though doing so can help reduce risk. But rebalancing has rarely been more challenging than it is today.
The Standard & Poor's 500-stock index is up 16% this year, and the 10-year Treasury bond has dipped 5.2%, which means you should move money from stocks into bonds.
Uh-oh. This is a dicey time to be plowing cash into fixed income. The Federal Reserve has repeatedly signaled that it will dial back its policy of buying bonds to keep interest rates low -- something that will pummel bond prices.
"I'm usually skeptical when someone says, 'This time it's different,' but once in a great while it is," says investment consultant Charles Ellis, author of Winning the Loser's Game. "You really need to think twice about owning bonds today."
Some thoughts from me:
- I have always been terrible at rebalancing. Over the years I've done quasi-rebalancing by investing new funds into areas that have fallen below my preferred asset allocation. But I've also always been heavily in stocks, so there hasn't been much need to shift many dollars around.
- I'm leery of bonds right now myself, unless your intent is to buy them and hold them for income until maturity. Interest rates are going to HAVE to go up at some point, right? Which means it's just a matter of time before bonds get hammered.
- I prefer to focus on the two keys to maximizing investment results: save as much as I can for as long as I can. These will yield much more fruit that concentrating on rebalancing and asset allocation will.
How about you? Do you rebalance regularly? Do you think you need to or is it not worth the effort?