Toby Mitchell, Vice President/Investments, is part of The CR Wealth Management Group of Stifel. Providing wealth management and investment banking services, Toby Mitchell develops, monitors, and rebalances his clients’ wealth management plans.
Rebalancing is buying and selling portfolio assets in order to return them to their original weights. Every asset in a portfolio has a preferred weight that is predetermined to match an investor’s investment objective, risk tolerance, and investment time fame. However, asset weights do not remain the same throughout the life of the portfolio. They change based on market movement.
For example, a client’s portfolio can have stocks alongside treasury and corporate bonds. The stocks can be weighted at 50%, treasury bonds at 40%, and corporate bonds at 10%. If the stock market goes up over a year and the value of stocks rise by 25%, this will increase the stock weighting. Toby will therefore sell stocks and reinvest in bonds to return each asset to its original weight.
Rebalancing is also performed within a specific asset class. For example, within a client’s stock mix, if stock X goes up 20% and stock Y goes down 10%, it will upset the original stock weight. Toby will therefore sell a portion of stock X and invest in another stock to maintain the original balance.
Rebalancing may have tax consequences, which you should discuss with your tax advisor.
An investment in stocks will fluctuate with changes in market conditions and may be worth more or less than principal invested when sold.
When investing in bonds, it is important to note that as interest rates rise, bond prices will fall.
Article provided by Toby Mitchell, Vice President/Investments with Stifel, Nicolaus & Company, Incorporated, Member SIPC & NYSE, who can be contacted in the New York, New York office at (212) 328-1000.
1095 Avenue of the Americas
3rd and 4th Floor
New York, NY 10036
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