A Winning Investment Portfolio

A Winning Investment Portfolio

January 03, 2022

Everyone loves a winner.

If an investment is successful, most people naturally want to stick with it. But is this the best approach?

It may sound counterintuitive, but it may be possible to have too much of a good thing. Over time, the performance of different investments can shift a portfolio’s intent – and its risk profile. It’s a phenomenon sometimes referred to as “risk creep,” and it happens when a portfolio’s risk profile shifts over time.

Rebalancing is the process of restoring a portfolio to its original risk profile.

A portfolio can be rebalanced in two ways.

The first is to use new money. When adding money to a portfolio, allocate these new funds to assets or asset classes that have fallen. But remember that diversification is an investment principle designed to manage risk, but it does not guarantee protection from losses.

The second way to rebalance is to sell enough of the “winners” to buy more underperforming assets. Ironically, this type of rebalancing actually forces you to buy low and sell high.

Periodically rebalancing your portfolio to match your desired risk tolerance is a sound practice regardless of market conditions. One approach is to set a specific time each year to schedule an appointment to review your portfolio and determine whether adjustments are appropriate.1,2

Curious about your portfolio’s specifics?

Simply set up a time to get together using our online appointment scheduler. Once you have identified the advisor located at the OneAZ Credit Union branch nearest you, click the "Schedule an Appointment" button to find a time available that is most convenient for you.

1. DQYDJ.com, 2020
2. TreasuryDirect.gov, 2020

This article is for informational purposes only and is not a replacement for real-life advice, so make sure to consult your tax, legal, and accounting professionals before modifying your investment strategy. Investing involves risks, and investment decisions should be based on your own goals, time horizon, and tolerance for risk. The return and principal value of investments will fluctuate as market conditions change.