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Overview | Knowing yourself | Asset Allocation and Diversification | Rebalancing and Monitoring


Discipline is a highly desirable trait, because it can lead to success in many aspects of our lives. Just as a disciplined diet and an exercise routine are critical to your physical health, a disciplined rebalancing strategy is critical to your financial well-being.

Because investment values tend to rise and fall, the percentages you have allocated to specific asset classes may not remain consistent with your original intentions over time.

For example: Assume you started with an asset allocation of 50% equity and 50% bonds. If your shares have consistently increased in value during the last 3-years but the value of your bonds have remained flat, you may find that your stocks have grown to represent more than 50% of your portfolio. To maintain your original asset allocation, you may wish to sell some stock, and purchase additional bonds to achieve a 50%-50% split.

Equity Bonds


Unfortunately, many of us don’t rebalance our portfolio on a regular schedule, because we’re either too busy or because we let our emotions get the better of us, choosing to hold on too long to investments that have performed well. Following a disciplined rebalancing strategy means you are more likely to sell higher-priced assets in favour of lower-priced ones— which makes plenty of sense.

We recommend rebalancing back to your target allocation at least annually. You may want to rebalance sooner if there is an extreme change in value in some part of your portfolio. Portfolio management doesn’t stop with the creation of your portfolio.

Time, not timing

Trying to time when to invest can be tricky. Even if you were to anticipate the market correctly and receive greater returns on your investments, frequent trading can jeopardize your portfolio. The history of the stock market shows that those who merely remained invested over a long period—regardless of how the market was performing at any given time—did better than those who tried to time the market.

Therefore, remember to start early, invest regularly and allocate your assets optimally. You will soon meet your investment goals.