I just had a great investing year thanks to a record-setting U.S. stock market, so why is it so important that I consider rebalancing my portfolio? Shouldn’t I just keep riding the wave?


Rebalancing is always an important wealth-management tool, especially after a good run in the market.

The pandemic created the mother of all recessions last year, but thanks to massive government stimulus and relief packages much of the immediate economic damage was limited. In turn, the S&P 500 seemed to defy gravity with double-digit returns.

But investors need to keep in mind that not every stock did well in 2020, and not all the stocks that did well last year will do well in 2021. A handful of about 10 growth stocks benefitted from the pandemic and skyrocketed, carrying the S&P 500 to record highs. More traditional value stocks were flat for the year.

You don’t have to be a financial planner to realize that vaccinations will start returning life to normal later this year. People won’t Zoom as much, and customers will start returning to stores and restaurants. Consequently, there is an opportunity to buy low and sell high.

But relative valuations aside, there is a more important reason to rebalance. Generating double-digit investment profits is great, but it’s equally important to protect those gains.

If 2020 taught us anything, it’s that the world is an uncertain place and the unexpected can happen quickly. There is still a lot that can go wrong and derail the markets.

The first goal of every investor should be to attain or preserve their financial security. So even though the 2021 outlook is positive, it probably is a good idea to take some profits, put 2020 in the win column and gear up for 2021. And now is the time to sit down with your adviser and revisit your goals and objectives, to make certain your portfolio is appropriately allocated for the long run.

Contact us to learn how we can help.

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