Your portfolio shouldn’t be static either
You’ve likely already heard of “diversification,” which, simply put, is when you invest in different countries, asset classes, investment styles, company sizes, etc., in order to reduce your investment risk and grow your assets over the long term (because you’re always putting some money into the strongest-performing investments available).
If you have a portfolio that reflects your unique investor profile, you can rest comfortably knowing that your investments should work the way you expect – providing the returns you need with the level of risk you’re comfortable assuming.
But this portfolio isn’t meant to be a permanent solution for all your financial planning needs, and a “set it and forget it” strategy will only take you so far.
Why? Because your portfolio reflects who you are today but may not reflect all of your life circumstances tomorrow.
Your portfolio today should reflect your current:
•Number of children and their current ages
•Number of household cars and other large items
In fact, there are many, many parts of your life that may change over the next few years. For example, your children may go off to university in five years to 10 years, which would likely change how much you will be able to save for retirement during the years they are away at school. You may also grow more conservative in your investment approach, whereby, you don’t mind market swings today as much as you might in 10 years’ time.
All of these potentially life-changing circumstances may require you to revisit your portfolio strategy and consider rebalancing your portfolio of investments so that it better reflects who you are at that point in time. This isn’t a reaction to short-term market noise, but is instead a way to ensure your portfolio continues to meet your unique needs.Source: http://www.ipcpeterborough.com/eNewsletter/September2014/ARTICLE1130.aspx