Investors who wish they were better at buying low and selling high actually have a tool that can force them to do just that. It’s called “rebalancing” – the practice of regularly re-allocating a portfolio so the investments in it stay in their originally intended proportions.
A 60 percent stocks-40 percent bonds portfolio will get out of kilter if you leave it alone long enough. To rebalance, you have to cut back on the portion that grew – typically the stocks – and add money to the other side.
An investor who does that regularly will protect herself from taking more risk than she intends. She also will often lock in gains and buy securities at better prices than she might otherwise.
Read More At Reuters.