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The Most Important Investing Move to Make in 2014

By Dan Caplinger - Updated Mar 7, 2017 at 4:08PM

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As the New Year approaches, be ready to make this smart money move right away. Find out about it here.

This has been an incredible year for stocks. But smart investors also realize that 2013's big gains in the stock market has left their portfolios riskier than they were at the beginning of the year, and they're taking steps to control that risk. What should you do?

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at the key money move to make: rebalancing your portfolio. Dan notes that with bond ETF iShares Aggregate Bond (AGG -0.45%) down for the year while Vanguard Total Stock (VTI -0.31%) has risen 32%, a portfolio balanced 50/50 in stocks and bonds at the beginning of the year now has a 60/40 bias toward stocks, with attendant higher risk. Dan also goes through the use of rebalancing in subsectors of the stock market, using biotech Gilead Sciences (GILD -0.40%), various health-care stocks, and utilty FirstEnergy (FE 2.31%) to illustrate the concept. Dan concludes that rebalancing can help you avoid unnecessary surprises if the market reverses course and heads lower in 2014.

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Stocks Mentioned

iShares Trust - iShares Core U.S. Aggregate Bond ETF Stock Quote
iShares Trust - iShares Core U.S. Aggregate Bond ETF
AGG
$100.60 (-0.45%) $0.45
Gilead Sciences, Inc. Stock Quote
Gilead Sciences, Inc.
GILD
$62.83 (-0.40%) $0.25
FirstEnergy Corp. Stock Quote
FirstEnergy Corp.
FE
$38.15 (2.31%) $0.86
Vanguard Index Funds - Vanguard Total Stock Market ETF Stock Quote
Vanguard Index Funds - Vanguard Total Stock Market ETF
VTI
$194.59 (-0.31%) $0.60

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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