Opinion

John Wasik

Do some spring rebalancing to reduce risk

Apr 5, 2012 20:20 UTC

CHICAGO (Reuters) – To some, spring means cleaning, renewal and yard work. For nervous Nellies like me who still see the ghost rider of 2008 in my rear-view mirror despite the market being up sharply so far in 2012, it means rebalancing my portfolio.

There’s nothing sexy about rebalancing. You simply plod through your account statements and reorient your nest egg toward your objectives while lowering risk. The crux is that if you do it right, you are purchasing less-favored assets and selling higher-valued securities. In other words, you are buying low and selling high, which is what most investors consistently fail to do. Far too many folks buy on the way up and hope that good times will continue indefinitely, thus ignoring the downside risk.

If you don’t rebalance, your portfolio gradually becomes dominated by higher-risk and potentially over-valued assets. When the eventual correction or crash comes along, the resulting fall is much steeper – if you haven’t rebalanced.

I took a peek at my portfolio recently, and due to the bull run of late, I noticed that stocks comprised almost 58 percent of our joint 401(k) and individual retirement account holdings. Since my wife and I resolved that we’d never let stocks comprise more than half of our portfolio, we’ll have to make some adjustments. We still haven’t completely recovered from the train wreck known as the 2008 meltdown. As you can imagine, we’re more cautious these days.

For my family’s portfolio, based on my age of 54, I like to invest at least half in fixed-income. As a rule of thumb, your age should roughly match your target fixed-income allocation, if you’re a moderate to conservative investor.

COLUMN: Do some spring rebalancing to reduce risk

Apr 5, 2012 20:12 UTC

CHICAGO, April 5 (Reuters) – To some, spring means cleaning,
renewal and yard work. For nervous Nellies like me who still see
the ghost rider of 2008 in my rear-view mirror despite the
market being up sharply so far in 2012, it means rebalancing my
portfolio.

There’s nothing sexy about rebalancing. You simply plod
through your account statements and reorient your nest egg
toward your objectives while lowering risk. The crux is that if
you do it right, you are purchasing less-favored assets and
selling higher-valued securities. In other words, you are buying
low and selling high, which is what most investors consistently
fail to do. Far too many folks buy on the way up and hope that
good times will continue indefinitely, thus ignoring the
downside risk.

If you don’t rebalance, your portfolio gradually becomes
dominated by higher-risk and potentially over-valued assets.
When the eventual correction or crash comes along, the resulting
fall is much steeper – if you haven’t rebalanced.

Green investing good for world, maybe not for you

Apr 2, 2012 18:59 UTC

CHICAGO (Reuters) – Want to vote with your dollars when it comes to environmental concerns? One way is to invest in environmentally focused mutual and exchange-traded funds, although you may be trading your green conscience for increased portfolio risk.

People who are concerned about energy prices and climate change have put more than $3 trillion into the hands of managers who target positive environmental, social and corporate governance practices, encompassing more than 250 investment funds, according to the Forum for Sustainable and Responsible Investment’s 2010 report on socially responsible investing.

Like any sector, environmental stocks are volatile. One year ethanol producers are hot, then sold off. Solar-panel manufacturers sizzle – and then fade.

COLUMN: Green investing good for world, but maybe not for you

Apr 2, 2012 16:27 UTC

CHICAGO, April 2 (Reuters) – Want to vote with your dollars
when it comes to environmental concerns? One way is to invest in
environmentally focused mutual and exchange-traded funds,
although you may be trading your green conscience for increased
portfolio risk.

People who are concerned about energy prices and climate
change have put more than $3 trillion into the hands of managers
who target positive environmental, social and corporate
governance practices, encompassing more than 250 investment
funds, according to the Forum for Sustainable and Responsible
Investment’s 2010 report on socially responsible investing.

Like any sector, environmental stocks are volatile. One year
ethanol producers are hot, then sold off. Solar-panel
manufacturers sizzle – and then fade.

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