Different investments appreciate at different rates. Therefore, over time asset classes with a higher rate of growth will make up a larger percentage of the total mix. Rebalancing transfers money out of more aggressive funds and places them in more conservative funds, thus allowing you to maintain the original asset allocation mix. It s generally a good idea to consider evaluating your portfolio once a year to see if it s time to rebalance. The stock market has recently experienced several years of double-digit performance and many people are forgetting that there is always potential for risk.
Risk is the chance of realizing low returns or perhaps even a loss.
The more you re willing to risk, the more you have a chance to gain. And, by the same token, the more you re willing to risk, the more you have a chance to lose. This may prevent you from meeting important financial goals. No two people have identical needs or tolerances for risk. You need to consider how long you have until retirement and how much risk you are willing to tolerate.