Tweak your way to riches by rebalancing your portfolio

Matthew Partridge explains why rebalancing your portfolio every now and again can be a great way to ensure long-term gains.

Timing the market is a mug's game. The evidence shows clearly that jumping in and out of stocks, hoping to catch the highs and the lows, is bad for your wealth. For example, in 2011 the University of California's Brad Barber and Terrance Odean looked at the track records of Taiwanese day traders. They found that between 1992 and 2006 only 1% were consistently profitable. In another study they found that even successful day traders paid so much in brokers' fees that it outweighed any outperformance they achieved.

So should you move to the other extreme and "buy and hold" forever? It's certainly more sensible than day trading. But "buy and forget" can leave you heavily exposed to certain assets during boom times and have you biting your nails during a crash. This is where "rebalancing" comes in.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
Dr Matthew Partridge
Shares editor, MoneyWeek

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri