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Overview: Investment Strategies Continued Rebalance After you have established your asset allocation strategy and selected the specific investments that match your optimal portfolio’s asset classes, don’t forget to follow up on your plan. The last part of the asset allocation strategy is to review your portfolio at least once a year and rebalance it if necessary to make sure the asset allocations continue to match your investment objectives. One of the key components to strategic asset allocation is to review your investments annually and rebalance when necessary. Be sure that you choose investments that allow for repositioning within the investment itself. For example, consider an investor who, after reviewing his goals and risk tolerance, decided to position 50% of his portfolio in stocks for growth, 40% in bonds and 10% in cash. Then, after a year in which bonds did well and stocks did even better, the growth portion of this investor’s portfolio increased from 50% to 60%. By default, the bonds portion would have been reduced to 30%. The portfolio now would be much more aggressive and probably would not continue to meet the investor’s original goals and objectives. It may be time for this investor to rebalance to keep the portfolio in line with his ideal asset allocation. These illustrations are hypothetical and only an example. They do not reflect the return of any specific investments and are not a guarantee of future return. Rebalancing mutual fund investments that are outside tax-deferred portfolios (such as annuity contracts, IRAs and employer-sponsored plans) generally can result in current taxes on gains from the sales of mutual fund shares. Let's move on to Retirement Planning. < BACK NEXT > #40131