Market View: The Importance of Rebalancing

You divide your portfolio between stocks and bonds based on your risk tolerance, investing time frame, and other factors. Asset classes grow at different rates, so it's important to "rebalance" periodically to maintain your desired mix and risk level.

This chart shows how an evenly split portfolio would have changed from 1988 to 2008 without rebalancing. By 1998, stocks accounted for 70 percent of the portfolio. Retirees who withdrew money during the 2000-2002 market downturn faced greater losses than if they had rebalanced to maintain the 50-50 split.

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This illustration was compiled using information from outside sources. These companies are not affiliated with ICMA-RC. This information is being provided for educational purposes and is not intended to be construed as or relied upon as investment advice. ICMA-RC does not offer specific tax or legal advice. Individuals are advised to consider any new investment strategies carefully prior to implementing. The performance data quoted represents past performance. Past performance is no guarantee of future results.