Rebalancing Made Simple

A step-by-step guide to restoring your asset allocation

Christine Benz 29 March, 2012 | 4:39PM
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If you've put off rebalancing because the process seems daunting to you, read on. The following step-by-step guide simplifies the task using some tools on Morningstar.co.uk.

Step 1: Determine your asset-allocation targets
Your first step in the rebalancing process is to make sure you have an asset-allocation framework. If you had a stock/bond target that made sense for you before the recent market downturn, it should still fit now. And if you don't have an asset-allocation plan, it's time to make sure you have one.

My favorite 'quick and dirty' method of getting in the right asset-allocation ballpark is to look at the asset allocations of target-date mutual funds geared toward individuals in your age range. Of course, there are no one-size-fits-all asset-allocation solutions--none of us knows how long we'll live, for one thing, but these can be a good starting point for your asset-allocation framework.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Christine Benz

Christine Benz  is director of personal finance at Morningstar and author of 30-Minute Money Solutions: A Step-by-Step Guide to Managing Your Finances.