Rebalance Your Asset Allocation
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Check your allocations to stocks, bonds and cash at least once a year. Have they shifted significantly? If so, rebalancing is a way to help ensure that your portfolio does not overemphasize one asset category—and that you maintain a comfortable level of risk.
Consier how average market returns would affect a portfolio that wasn't rebalanced over 10 years.
"Say you start out with 60 percent stocks and 40 percent bonds and cash," says Jeff Wills, a SunTrust Investment Services Financial Advisor. "In 10 years, market returns might boost stocks to a much larger percentage of your savings—making your portfolio a lot riskier."
The U.S. Securities and Exchange Commission (sec.gov) describes three basic ways to rebalance:
1. Sell.
You can sell off investments from overweighted asset categories and use the proceeds to purchase investments for underweighted asset categories.2. Buy.
You can purchase new investments for underweighted asset categories.3. Shift.
If you are making continuous contributions to the portfolio, you can alter your contributions so that more investments move to underweighted asset categories until your portfolio is back in balance.
When you realign by shifting assets from overrepresented to underrepresented funds, you may pay small transaction fees. Wills recommends rebalancing only when allocations differ from your targets by 10 percentage points or more. That move can keep you on pace—and keep risk in check.
Need Help To Find Your Balance?
You can meet with the retirement specialist in your neighborhood. Just call or stop by the branch to make an appointment. Call 800.511.2276 to learn more.
This article is general in nature and does not constitute legal, tax, or investment advice. SunTrust makes no warranties as to accuracy or completeness of this information, does not endorse any non-SunTrust companies, products, or services described here, and takes no liability for your use of this information.
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Contact a SunTrust Retirement Specialist at 800.511.2276
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