I can typically detect when my life is out of balance. Usually, my body lets me know first. My brain slows down and I start doing things like showing up at the gym with only one tennis shoe. My right eyelid starts doing a strange twitching/fluttering thing. I start waking up at 4 a.m. every single morning for no apparent reason. Basically, my body spares no time in announcing that something is off and I need to be rebalanced. You don't need to be a new-age guru to know that balance is central to living a healthy life.
Why Portfolio Rebalancing is Crucial
In much the same way, a portfolio needs to be balanced (in an allocation that is suitable for you); however, our portfolios are not as quick as our bodies to announce their lack of equilibrium. Often times, the lack of balance may initially look like a positive thing when we review our monthly statements. "Wow, the stock market is really up this month!" you may remark. "Things are going well with my investments. No need to change anything now. I want this to continue!" When things are going well, we don't feel compelled to make any changes. The important thing to remember, however, is that when there is significant movement in the stock market (in either direction), it may be time for a little portfolio rebalancing.
Example: Why Portfolio Rebalancing Is Important
Rebalance Your Investments and Your Sanity
When I am feeling my most overwhelmed and balance seems like an idea only found in fairy tales, I remind myself that the difference between a forgetful, eye-twitching, insomniac me and a balanced, coherent, and rested version is the simple quotient of time. And so I try to carve out an hour here and there to do those little things that help me to maintain a healthy balance. It is the same with your portfolio. All you need to maintain the proper balance in your portfolio is a little bit of time with your financial advisor a few times a year. Hopefully, in doing so, you will find yourself to be "healthy, wealthy, and wise."