“The beauty of periodic rebalancing is that it forces you to base your investing decisions on a simple, objective standard” – Benjamin Graham

Investors sometimes forget to rebalance their portfolios periodically. Over time, certain investments may outperform or underperform others, leading to an imbalance in the portfolio’s asset allocation. This means your potential returns over the longer term are more at risk. Rebalancing simply means making the trades necessary to bring a portfolio back to its intended asset allocation (investment mix) after fluctuations in the market has caused your portfolio mix to change. By rebalancing regularly, investors can sell high-performing assets and buy underperforming ones, ensuring their portfolio maintains the desired risk profile and potentially maximising their returns over the long term. On occasions when the asset allocation mix (small-cap stocks, large-cap stocks, funds/investment companies, bonds), are distorted to the extremes the now over-weight segment of the portfolio can be reduced/re-sized back to its original intended percentage and the under-weight segment can be increased if/when it appears undervalued. Long-term this rebalancing and buying of undervalued assets can lead to the regularly rebalanced portfolio outperforming the pure buy-and-hold portfolio.