Ask the Hammer: What's the Best Way to Rebalance My Portfolio?

Jeffrey Levine, director of advanced planning at Buckingham Wealth Partners, discusses in this Retirement Daily video the best ways to rebalance an investment portfolio.
Author:
Publish date:

What’s the best way to rebalance my portfolio? Should I sell my winners and buy my losers?

That was the question posed to Jeffrey Levine, director of advanced planning at Buckingham Wealth Partners, in this episode of Ask the Hammer on Retirement Daily.

And the answer is: "There is no single best way to rebalance your portfolio," said Levine. "It's what's the best way for you."

And what's best for you will depend on many factors, including, but not limited to what stage of life you're in (the accumulation versus the decumulation phase) and where your assets are located (taxable versus tax-deferred versus tax-free).

To be sure, the most common way to rebalance is to sell what risen in value and what's declined in value to bring your portfolio to its target asset allocation.

But if you're in the accumulation phase, you might readjust your contributions and purchase what's declined in value and stop purchasing what's risen in value until your portfolio is back to its target asset allocation. 

On the other hand, if you're in the decumulation phase, you might consider withdrawing that which has risen in value until your portfolio is back to its target asset allocation.

In addition, Levine also said it's important to weigh the tax consequences of rebalancing, especially in the case of taxable accounts. In general, Levine said he's a fan of rebalancing using tolerance bands but it might be easier to do with the help of a financial adviser who has access to special software.

Read Optimal Rebalancing – Time Horizons Vs Tolerance Bands and Portfolio Rebalancing Usually Reduces Returns, But Also Risk.

Got Questions?

Email AsktheHammer@BuckinghamGroup.com

More Ask the Hammer

Ask the Hammer: How to Invest the Fixed-income Portion of Your Portfolio

Ask the Hammer: Should Parents Provide Financial Support to Adult Children?

Ask the Hammer: What's the Value of a Risk Tolerance Questionnaire?

Ask the Hammer: Tips on Selecting the Best Retirement Plan Payout Option

Ask the Hammer: What Are The Distribution Rules for Beneficiaries of Inherited IRAs?

Ask the Hammer: Should We Worry About the National Debt?

Ask the Hammer: Tax Consequences to Selling Assets in a UTMA or UGMA

Ask the Hammer: Three Tips on Buying a Used Car

Ask the Hammer: Who Qualifies for a Coronavirus-related Distribution?

Ask the Hammer: Is it Possible to Put an RMD Back Into an IRA?

Ask the Hammer: What Does Reg BI Mean for Investors?