|By following the first three steps, you've crafted a portfolio that you can live with. You'll want to make sure that it continues to fit your goals and needs, though. That requires occasionally rebalancing, or restoring the original blueprint. We'll cover the ins and outs of this in course 305: Rebalancing Your Portfolio.
Stocks often gain more than bonds or cash. Over long periods of time, stocks will probably take up more of your portfolio than they did in your original blueprint. Because stocks are riskier investments than bonds, your portfolio is becoming riskier as your stock position rises. That's why it's important to rebalance and restore your portfolio to its original pattern.
Similarly, not all stocks do well at the same time. Maybe your value stocks are outpacing your growth investments. If you don't restore your portfolio's original balance between the two styles, your investment success will become increasingly dependent on your value investments.
When you rebalance, keep your goal in mind. As you get closer to needing the money you've invested, the pattern you originally drew should change. Your portfolio should become more conservative as you approach your goal.
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