As the markets move month by month, your portfolio’s stock-bond mix will change, sometimes dramatically. If you had a 60-40 portfolio in mid-2008, the stock portion fell to about 45% by March 2009.

In life, balance is everything — whether it’s finding time between work and family or maintaining a healthy diet. The same ...

The act of selling the asset that has appreciated on a relative basis and buying the lagging asset adds return by “selling high” and “buying low” while maintaining the risk parameters of the portfolio ...

Why is rebalancing your portfolio important? To show why rebalancing can be so important, consider this simplified example. Let's say that you invest $10,000 and that you put $6,000 of this into a ...

For example, a portfolio rebalanced every month had an annualized return of 8.5% and a standard deviation of 12.1%.

For example, if stocks outperform bonds, then perhaps your allocation drifts to 65/35. To rebalance that back to 60/40 requires you to sell some stocks and buy some bonds.

You can also rebalance between differing equity portions of your portfolio – if, say, the emerging markets portion gets too high or too low, you can rebalance it to a target weight.

Also, rebalancing doesn’t necessarily involve selling. If you are adding cash to a portfolio you might purchase more of the laggards — banks, for example during the technology bull market.

In life, balance is everything — whether it’s finding time between work and family or maintaining a healthy diet. The same ...

As an example, maybe you target a 70% stock allocation, so you might decide to rebalance only if your stock allocation drops below 65% or climbs above 75% of your portfolio.