The Dow Jones Industrials (DJINDICES:^DJI) 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 (NYSEMKT:SPY) and iShares Russell 2000 (NYSEMKT:IWM) on the one hand with bond investments like iShares TIPS Bond (NYSEMKT:TIP) and PIMCO Total Return (NYSEMKT:BOND) on the other. By selling overweighted asset classes and buying underweighted ones, you can keep your risk in line and benefit from market moves.