Recent stock market highs have made it tempting for investors to let their portfolio “ride” the trend of these returns without adjusting their asset mix.
How can investors keep their portfolio allocations from drifting too far from their desired target allocations and potentially increasing their exposure to sudden market downturns?
A well-known form of adjustment is known as rebalancing. Rebalancing can be defined as reducing the percentage of the portfolio in the higher performing asset class and increasing the percentage in the underperforming asset class.
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