"What's the simplest strategy to boost my returns?"
This is one of the most frequently asked questions I hear when I'm on the road. And most people expect a long, drawn-out answer.
But in reality, there's a single word – the one you're about to see – that can lead to huge performance gains…
Try triple-digit huge – that's why I place a high priority on this technique in the Money Map Report's proprietary 50-40-10 Strategy. It's critical to the success tens of thousands of our subscribers have enjoyed over the years.
It's incredibly simple, too…
Rebalancing: Your "Buy Low/Sell High Guarantee"
Most investors haven't heard of "rebalancing." That's very surprising, given all the lip service Wall Street pays to fancy-pants diversification, hyping stocks, and day trading as a sure route to wealth these days.
What I like about rebalancing is that it's deceptively simple yet immensely profitable, because rebalancing forces you to buy low and sell high. There's no ambiguity, no emotion, and no second-guessing yourself.
What I positively love about rebalancing is that it can lead to greater profits, even if the markets drift lower. Not too many strategies can do that.
Rebalancing isn't difficult. It doesn't matter if you're a newly minted graduate with $1,000 to your name or a sophisticated investor with 50 years of experience and millions. Anybody can do it.
I want you to have every advantage possible when it comes to building wealth, so I'm going to share my take on rebalancing – what it is and how it works. Then, I'm going to show what it can mean for your money.
What It Means and How It Works
Technically speaking, rebalancing is the periodic adjustment of your investments to reflect market conditions that have changed. Boring… ugh!
The plain English definition is much more appealing: Rebalancing means you buy and sell specific investments that have gotten out of line with your plan in order to bring your risk down and boost your returns. (I love that part.)
Let's look at an example…
John has $20,000 split between two investments – stocks and bonds – each representing 50% of his assets. He's a balanced fellow and likes it that way. You probably know quite a few investors like John – who use index funds to invest just like he does, using some variation of the "set it and forget it" approach.
A year later, John finds that his stocks have appreciated by $5,000 while his bonds have fallen by $2,000. So his 50/50 split is now $15,000 in stocks and $8,000 in bonds, or 65/35. That doesn't sound too bad on the surface because the value of his overall portfolio is now $23,000.
But John's risks are mounting. Because his stocks have appreciated so much, he's got a far riskier portfolio than he thinks he does.
That's where many investors find themselves now.
The markets have run up 150.9% from their March 2009 lows, as of September 24, 2013. Anybody who's got stocks and who hasn't rebalanced is just asking for a repeat of 1999 – or 2007 if things roll over, or more appropriately, when they roll over.
Fortunately, the solution is very, very simple.
About the Author
Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs High Velocity Profits, which aims to get in, target gains, and get out clean. In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.