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How to Rebalance Your Portfolio

By Dan Caplinger – Feb 9, 2014 at 1:05PM

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Everyone's saying you should give your investments a checkup, but many don't know what to do. Here's what you need to know.

The Dow Jones Industrials (^DJI 0.10%) had a great 2013, but the average has gotten off to a terrible start this year. It's important to check your risk level and rebalance your portfolio to avoid unnecessary losses, but what exactly is involved in rebalancing?

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, goes through how you can rebalance your portfolio easily. Dan notes that the key to rebalancing is having an asset allocation that properly balances stock investments like SPDR S&P 500 (SPY -0.11%) and iShares Russell 2000 (IWM 0.58%) on the one hand with bond investments like iShares TIPS Bond (TIP 0.74%) and PIMCO Total Return (BOND 0.51%) on the other. By selling overweighted asset classes and buying underweighted ones, you can keep your risk in line and benefit from market moves.

Dan Caplinger and The Motley Fool have no position in any of the stocks mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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