Is your investment portfolio working as hard as it should be? What if I told you that most investors are leaving money on the table by not rebalancing properly - or worse, rebalancing too often?

In this week's episode, I dive into the science and strategy behind portfolio rebalancing, and I'll share three actionable frameworks that could boost your returns while keeping risk in check.

The three key aspects of portfolio rebalancing: the why, the when, and the how.

First, why rebalance at all? Think of your portfolio like a garden. Over time, some plants grow faster than others, taking up more space than intended. Rebalancing is like pruning – it keeps everything in proportion and ensures no single area dominates the whole.

The fundamental benefit of rebalancing is that it enforces a "buy low, sell high" discipline. When you rebalance, you're essentially selling assets that have become overweight (and thus relatively expensive) and buying assets that have become underweight (and relatively cheaper).

Rebalancing is something many investors get wrong. More frequent rebalancing isn't necessarily better. Each rebalancing event incurs transaction costs and potential tax implications. The key is finding the sweet spot.

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⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠Brian D Muller(AAMS©), Founder, Wealth Advisor

XYPN Invest Disclaimer:

Brian Muller is an Investment Adviser Representative of XYPN Invest, an SEC-registered investment advisory firm doing business as Momentous Wealth Advisors. This podcast is not published on behalf of XYPN Invest, and the views expressed herein are solely those of Brian Muller.

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Takeaways:

• 1. A failure to periodically rebalance one's investment portfolio can lead to an unintended increase in risk exposure that is misaligned with an investor's original risk tolerance.
• 2. The fundamental principle of portfolio rebalancing is to enforce a disciplined strategy of buying low and selling high, which can enhance overall investment returns.
• 3. Major life events such as job changes or approaching retirement should prompt a reassessment of one's portfolio allocation to ensure alignment with changing financial goals.
• 4. Implementing a rebalancing calendar can facilitate a systematic approach to maintaining desired asset allocation, thereby reducing emotional decision-making in investment management.
• 5. Research indicates that less frequent rebalancing can yield results comparable to monthly rebalancing while incurring lower transaction costs and tax implications.
• 6. Utilizing a hybrid approach to rebalancing that combines both time-based and threshold-based strategies allows for effective portfolio management without unnecessary trades.