You Should Rebalance Your Account Once a Year
By Saghir Aslam
Rawalpindi, Pakistan
(The following information is provided solely to educate the Muslim community about investing and financial planning. It is hoped that the Ummah will benefit from this effort through greater financial empowerment, enabling the community to live in security and dignity and fulfill their religious and moral obligations towards charitable activities)
It is extremely important that you should get together with your investment advisor and taking inventory of your stock portfolio. Write down what kind of portfolio do you have. Are you investing in stocks, bonds, mutual funds or are you investing only in the domestic market or are you investing worldwide. There’s a time to invest in each country’s market, for example Europe. It might be the perfect time to invest in Europe while not locally. Over the years, emerging markets have brought in terrific results. When you want to invest in emerging market or in any market, you need to do your homework. The reason is important to check and rebalance your portfolio minimum once a year. If you can do it twice a year, it’s even better and you might end up getting even better results if you do it quarterly. As the world has changed and we are living in the very fast moving world, I take some time every month and look at the situation in different countries around the world including good old America and then I look at my portfolio to see am I invested properly? Or do I need to make necessary changes to g along with the present situation in different countries. By doing so with Allah’s (swt) blessing, it brings me good results. You have to decide how much time you want to spend in the market. You will make money, in other words make profits according to the homework that you have done. Jus to take tips from friends here and there is not a good way on investing. Investing properly and successfully requires whole lot of reading and research. For example, I spent a lot of time going over investor’s business daily and on the weekend barons I call barons as the bible of investing. From baron, every week, you can get lot of good information. If you have to do it on your own, it will take you tremendous amount of hours or even days. So in this case, barons have done lot of your homework. They have searched, they have researched and they have come up with investment ideas that they feel are best at this time. However, once again you must do your own homework and thoroughly take your time and decide if it fits in your thinking and ideology.
Set a time each year that you want to rebalance your account and do it at the same time each year. You want to take a look at each and every position. Evaluate and see where the market is, what the trend of the market and where you want to put your money. Once you have done all your research then take proper action and balance your portfolio.
If you retirement investments are growing, that’s great. But when you receive an update on your account, don’t just look at the bottom line. Also check your asset mix to see if you are still comfortable with how your account is divided among your investment choices. After reviewing your asset allocation, you may need to rebalance your portfolio so that it accurately reflects your investment strategy.
Becoming Unbalanced
When you set up your investment portfolio, you may have selected investments in a variety of asset classes in order to spread out your overall risk. If you have a high tolerance for risk, your portfolio may have been heavily weighted in stocks, with less of your total account in bonds and money market investments. A conservative investor might have only a small fraction in stocks, with more of the account in bonds and money market investments. The right asset allocation is different for every investor.
Over time, your asset allocation will shift based on the performance of your investments. For example, suppose the stock investments in an investor’s portfolio have increased in value significantly over time. Those stock investments, which originally represented 50% of the entire portfolio, now represent 60% of the portfolio. The unbalanced portfolio id more aggressive than the investor intended or is comfortable with.
How to Rebalance
If your portfolio has become unbalanced, it’s relatively simple to rebalance it again. The investor in the previous example would need to reduce his or her stock investments and direct more money into the other investment categories in order to get back to the original allocation.
While you should enjoy the growth of your retirement investments, remember to pay attention so that your portfolio doesn’t get unbalanced. It’s a good idea to review your asset allocation periodically to make sure that you maintain your investment strategy.
Provided by courtesy of [name], a [title] with Wachovia Securities in [city] . For more information, please call [name] at [number]. Wachovia Securities, LLC, member New York Stock Exchange and SIPC, is a separate non-bank affiliate of Wachovia Corporation. ©2001 Wachovia Securities.
(Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, nor does he suggest that anyone will earn a profit when or if they purchase stocks, bonds or any other investments. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor, or certified financial planner. Mr Aslam does not have anything for sale.)
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