The real value of rebalancing your portfolio

Rebalancing your portfolio is a widely parroted investment basic, but not everyone agrees that it boosts your returns

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An annual evening of the scales is good discipline

One under-appreciated problem with investing is "analysis paralysis": you can spend so much time trying to figure out the best way to do something that you end up doing nothing at all. Take rebalancing, viewed by many as an investment basic. First, you decide on a suitable asset allocation (say 60% equities, 40% bonds). Then, when the allocation gets too far out of line with your initial plan, as a result of market moves, you top up or sell the excess as necessary. So, if after a year 65% of your portfolio is in equities, and 35% is in bonds, you sell equities and buy bonds until you're back at 60/40.

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John Stepek

John Stepek is a senior reporter at Bloomberg News and a former editor of MoneyWeek magazine. He graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.