Rebalancing: An Important Tool for Controlling Portfolio Risk

Topics:
Investment and Capital Markets
Tags:
Alliance Capital Management,
Asset Management,
Business Operations,
Operational Planning,
Portfolio,
Tool
Source:
Alliance Capital Management

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Overview: This article focuses on the systematic rebalancing, which follows the principle of buying low and selling high by trimming a portfolio's exposure to assets that have performed well and reinvesting the proceeds in assets that have been weaker. If done properly, it can reduce portfolio risk and enhance return. So why are so many investors not doing it? In large part, it's because the process is emotionally counterintuitive. Following a disciplined rebalancing strategy can help in controlling emotions while potentially enhancing a portfolio's risk/return profile.

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Format: PDF | Size: 300KB | Date: Aug 2005 | Pages: 6

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