When should you rebalance your retirement portfolio?

Rebalancing is a simple action with powerful results. Long-term investors generally don't disagree with that. They realize it provides an opportunity to take profits and buy into some weaker areas of their portfolio. Rebalancing keeps your risk at your targeted capacity and preference as well. Are you consistently doing it?

There are many opportunities for rebalancing -- really any date could suffice, but my preference is December 1st and May 1st. Markets are seasonal, but I personally don't believe the seasonality is strong enough to "sell in May and go away". However, you can take your profits in May and receive some of the benefit of that maxim.

December 1st is another seasonal opportunity. December is typically a strong month; therefore, you can rebalance in early December to take advantage of the strength that statistically occurs from December to April. Of course, if the year has been good, you will actually be lightening up on your equity, but this is all part of maintaining a disciplined exposure to stocks.

A third opportunity for rebalancing is tax-loss harvesting (only for non-retirement accounts) during a sell-off in markets. You may wish to take a losing fund and replace with a similar fund in order to realize losses. This will offset the potential taxable gains you may have from rebalancing the portfolio. You may want to set some price trigger alerts so that you know when the opportunity presents itself. Marketwatch has some free tools that allow you to get an email notification when a price hits a certain mark.

Need help? TruePath can help on an hourly basis to help you sort out your portfolio. Sometimes investors just need support to be confident in their choices. There is nothing wrong with that!