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There's a lot of uncertainty in the markets right now, which means it's a perfect time to discuss one of the most powerful Total Wealth Tactics of all.
Before I tell you what it is though, let me say that the tactic we're going to discuss today can significantly boost your returns and reduce your losses – all while taking less than 90 seconds of your time.
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90 Seconds Could Make or Break Your Profits
People ask me all the time how much time they have to put into investing to make the process "worth it" and they nearly fall over every time they hear my answer…
"…about 90 seconds."
That's about how long it will take you to "re-balance" your portfolio.
If you've just joined us, rebalancing is one of the single most powerful yet easy to use strategies available to individual investors today,
It all comes down to five simple reasons:
- You can do it anytime
- You can lock in profits immediately
- You minimize risk every time you rebalance
- You maximize upside potential for years to come
- You can do it easily… in about 90 seconds
Simply put, rebalancing is a strategy that ensures your money is working the way you want and, perhaps most importantly, is aligned with your individual risk tolerance, objectives, and financial aspirations.
Rebalancing: What It Means & How It Works
Let's say you have a $100,000 portfolio that's invested 50%-40%-10% in stocks, bonds, and speculative investments, respectively. That means you'd have $50,000 in stocks, $40,000 in bonds and another $10,000 in speculative investments.
A year from now, let's suppose that stocks have appreciated 10% and bonds have lost 12% because the Fed got aggressive. Let's also say you hit the big time with your speculative play and that it's up 100%.
That means your $100,000, 50-40-10 portfolio would now be worth $110,000 and the allocation would be more like 50%-31.8%-18.2%.
To get back to your targeted 50-40-10 risk profile, you'd rebalance by selling $9,000 worth of your speculative investments and buying a corresponding $9,000 worth of bonds using the proceeds, assuming you had no new money to invest.
This is where most investors go off the rails.
They don't see a problem with letting their winners "ride." That's fine if you're in a Las Vegas casino and want to leave your money on the table even as you continue to bet you won't lose it, but that strategy is totally unsuited to today's financial markets. Every dollar you earn if they don't rebalance means you're taking on more risk.
This is where many investors found themselves coming into the Dot.bomb crash of late 1999/2000 and the Financial Crisis of 2008. They thought they were doing great. What they didn't realize was how concentrated their risk was becoming… in the very stocks that were making them gobs of money.
You can see that very clearly in orange. Note how muc…
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.