Investing is not a set-it-and-forget-it affair. As markets ebb and flow, the actual asset allocation in your portfolio can drift from its original target, inadvertently altering your exposure to risk and potentially diluting your investment returns. This is where the practice of rebalancing your portfolio becomes crucial. Creating a thoughtful strategy for your portfolio with intentional allocations to certain investments is very important, but time inevitably pushes those allocations in different directions. For this reason, adding regular rebalances to your strategy is just as important as the original allocation strategy itself.
Why Rebalance?
Rebalancing your portfolio is essential to maintain the alignment of your investments with your intended risk tolerance and financial goals. As market conditions fluctuate, so do the values of your assets, causing their proportional representation in your portfolio to shift. For example, a significant rise in equity prices relative to bonds can increase your exposure to equities, thus heightening your portfolio’s overall risk. By neglecting to rebalance, you might inadvertently face higher volatility and potential losses. Rebalancing counters this by adjusting your holdings to bring them back to their target allocations, thereby ensuring that your investment remains in line with your risk capacity and investment objectives. Periodic rebalancing helps safeguard your investment strategy against market unpredictability and personal life changes.
How to Rebalance
Rebalancing your investment portfolio is a strategic exercise that requires careful planning and execution. Here’s how you can approach it:
- Setting a Rebalancing Schedule: Decide whether to rebalance on a periodic basis (e.g., quarterly, annually) or when your portfolio deviates from its target allocations by a specific percentage (threshold rebalancing). Periodic rebalancing is straightforward and predictable, while threshold rebalancing is more responsive to market movements.
- Analyze and Assess: Regularly review your portfolio to understand how each asset class’s performance affects its proportion relative to your overall investment mix. This involves comparing the current weight of each asset in the portfolio against your target allocations. Advanced tools or financial software can assist in tracking these metrics efficiently.
- Make Adjustments: Based on the analysis, rebalance by selling assets that are overrepresented and buying those that are underrepresented. The goal is to sell high and buy low, capitalizing on market fluctuations to maintain your risk level and enhance returns. This might involve reducing positions in overvalued equities and increasing holdings in undervalued bonds or other asset classes.
- Consider Tax Implications: Evaluate the tax impact of any trades you make during rebalancing. Utilizing tax-advantaged accounts such as IRAs for rebalancing can help minimize the tax burden. Also, consider strategies like tax-loss harvesting to offset gains with losses.
- Continuous Monitoring: Regular reviews of your portfolio not only pertain to rebalancing but also to ensuring that your investment strategy still aligns with your current needs and future goals.
The Benefits of Rebalancing
The primary benefit of portfolio rebalancing is risk management. Regular rebalancing forces you to “buy low and sell high,” as you sell portions of your investments that have performed well and buy more of those that have underperformed. This disciplined approach helps lock in gains and reinvest in underpriced assets, potentially boosting your long-term financial returns while keeping your risk level consistent with your initial strategy. Beyond enhancing returns, rebalancing helps you adhere to your financial plan, promoting investment discipline, especially during volatile markets. It prevents performance chasing – the risky practice of piling into assets after they have risen sharply – and helps maintain a diversified portfolio that can withstand a variety of market conditions.
Costs and Considerations
While rebalancing has many benefits, it also comes with costs and considerations. Every transaction you make can incur trading fees, and selling assets for rebalancing might trigger capital gains taxes. These costs can diminish the net benefit of rebalancing if not carefully managed. To minimize the financial impact, consider employing strategies such as utilizing tax-advantaged accounts (like IRAs or 401(k)s) for making adjustments or employing tax-loss harvesting where appropriate. Additionally, the frequency of rebalancing should be weighed carefully – too frequent rebalancing may lead to excessive costs, whereas infrequent rebalancing might allow for too much drift from your target allocation. Investors should also be mindful of the market conditions and personal circumstances that might necessitate more or less frequent rebalancing.
Striking the Right Balance
Rebalancing your investment portfolio is a critical discipline that aligns your assets with your financial goals and risk tolerance over time. This proactive strategy ensures that your investments do not drift significantly from your desired asset allocation, thus maintaining an appropriate balance between risk and return. While rebalancing offers significant benefits such as optimizing returns and managing risk, it also requires careful consideration of transaction costs and tax implications. By incorporating regular check-ins and adjustments, you ensure that your portfolio continues to reflect your current financial situation and future aspirations. In essence, effective rebalancing is not just about preservation but also about enhancing the potential for achieving long-term financial success.
If you have any questions, give us a call, or read Chapter 5 about investments, in “Wealth on Purpose” by Bryan Ballentine.
Have a great weekend!
Sources: Located at the bottom of the article.
Golf Tip of the Week
Masters 2024: Scottie Scheffler did what was expected, which you’re not supposed to do
AUGUSTA, Ga. — What Scottie Scheffler was expected to do, he did, which you’re not supposed to do. Golf is too hard and the professional ranks are too deep. Some will affirm a competition was afoot at the 88th Masters, and as the shadows of the loblolly pines grew there was even a four-way tie at the top, 4:23 p.m., to be exact. Scheffler knew what the clocks didn’t, which is that it was only a matter of time before the four turned into one. Scheffler knew what we should’ve known: This is a man who cannot be stopped.
This was not a week for the dramatic, to make one of those runs Augusta National is notorious for producing. This was a week of attrition, and while others were worn down by the course and the wind or the significance of what they were trying to chase, the unassuming superstar was undeterred by his surroundings, in command of his game and of himself. For that, Scheffler earned his second Masters title.
“No, it’s hard to put into words how special this is,” Scheffler said after his final-round 68 was good enough for a four-shot win. “It’s been a long week, a grind of a week. The golf course was so challenging, and to be sitting here wearing this jacket again and getting to take it home is extremely special.”
Special. That word’s been used a lot recently when it comes to Scheffler. His game is consistent and measured and total, a game that produces rounds that can come off as plodding in the best possible connotation. His greatest sin is that performance, coupled with an unrelenting niceness, can come off as mundane. He is not a roguish cowboy, someone who makes a mess by firing first and asking questions later, saving the day in spite of himself. He is a Navy Seal, in and out and mission complete before anyone is the wiser. It’s not as exciting, but that’s the point.
Conversely, the few that are blessed with the ability to make this impossible game look easy can view that as a curse, for when the performance inevitably falls short of the impossibly high bar it is viewed as a disappointment. (That sound you hear is Rory McIlroy nodding solemnly.) Scheffler knows this burden. Last year he turned in the best ball-striking year of anyone not named Tiger, a performance that beget 17 top 10s in 23 starts. Yet his 2023 was noted for what it was not, his putting problems becoming the primary narrative over the spring and summer. That carried into the Ryder Cup, where Scheffler went 0–2–2 in four matches. “Worry” is too strong a sentiment, yet there was a genuine question if a generational talent could be kept from his potential because of the putter.
Those concerns were back-burnered heading into Georgia, for while Augusta’s greens are difficult there’s the belief they’re so difficult they actually level the playing field between the good and bad flat sticks. Besides, Scheffler had won the Arnold Palmer Invitational by four and became the first player to defend the Players Championship the following week. More impressive was the aura and reputation he was starting to build; when Wyndham Clark, who had the honor of finishing second at both Bay Hill and Sawgrass, saw Scheffler’s name climb the board that Sunday at the Players, Clark could only say, “Well, of course.” Scheffler had become as inevitable as a high-school crush ending in heartbreak.
“I feel like I’m playing really good golf right now,” Scheffler said of his run, which isn’t so much a run as it is a reality. “I feel like I’m in control of my emotions as I’ve ever been, which is a good place to be. I feel like I’m maturing as a person on the golf course, which is a good place to be. I think it’s hard to argue with the results of the last few weeks. I’ve been playing some nice golf. But I really try to not focus too much on the past.”
Trophies, however, are unfamiliar with inevitability, especially the green jacket. One doesn’t have to look far into this tournament’s past to see what Amen Corner thinks of inevitability. Scheffler held just a one-shot advantage over Collin Morikawa, with Max Homa and Ludvig Aberg barking behind. After three days of U.S. Open-like conditions there was the assumption the course would be set up for fireworks and drama, which is fun for everyone but the player attempting to keep the field at bay. Theoretically, everything was possible and nothing was assured.
That sentiment didn’t quite make it to the galleries. The crowds always know, for they are mirrors for what they are seeing. Sunday was the type of day you think about when you think about Augusta National, the sun high and the wind down, the patrons dotted in Easter pastels and the air permeated with cigar smoke. And while the Augusta crowds are the most respectful galleries in the sport, they’re also the most educated, and they knew who they were here to witness. On the third, where Scheffler made birdie to extend his lead to two, a man turned to his group and suggested they walk the back because “This one is over.” On the sixth, a patron joked Scheffler should have donned his green jacket from 2022 to intimidate Morikawa, causing another patron to reply, “We wouldn’t get to watch the ceremony afterwards,” a nod to closing tradition of last year’s winner awarding the best coat in sports to the new victor. The only issue seemed to be how many Scheffler would win by.
For posterity, the issue seemed in doubt, at least in the moment. Scheffler’s ball-striking forgot to make its tee time, missing four of the first seven greens. His competitors weren’t really making a move, yet Scheffler’s troubles opened the smallest window of hope for Aberg, Homa and Morikawa. They soon learned what other Scheffler foes have: it’s the hope that kills you.
Scheffler, who leads the tour in bounce-back birdies, added to his total at the eighth off a nifty up-and-down from the back of the green. He nearly holed-out for eagle from 90 yards that led to a tap-in on nine. Another superb approach at the 10th where he cleaned up the 10 feet that remained.
“I would say the best momentum turner that I had today was the birdie putt on 8. I hit two really good shots in there long of the green. I had an extremely difficult pitch that I hit up there about 10, 12 feet from the cup. It was a challenging read because it turned early and it was really straight at the end,” Scheffler said. “That kind of gave me some good momentum, and I used that to birdie 9 and 10 and keep pushing because I knew there was birdies out there on back nine. I had a lot of really talented players trying to chase me down, and I knew pars weren’t going to get it done.”
Around the same time, Scheffler’s pursuers met the end of their run. Morikawa found the left greenside bunker at the ninth and kept his third in the sand, leading to a double. Aberg was three under for the day until the 11th, when an aggressive approach met a watery demise. Moriakwa followed Aberg into the pond. The 12th rang its Golden Bell on Homa, who’s tee shot ended in a bush and resulted in a 5. Scheffler responded with a four-corners offense the situation called for, making it through Amen Corner unscathed. Plodding, sure. Today, plodding was good.
For good measure, Scheffler went for the par-5 13th in two, put his approach to a foot at the 14th and dropped a nine-footer for birdie at the 16th to put the tournament on ice. Turns out there’s some excitement to his game after all.
So what do we make of Scheffler? Nine wins in the last 26 months, two of them Masters, carving out distance between himself and the rest of the sport that makes the expanse of the Grand Canyon seem small. He is not just a star; he’s perched on stardom’s cliffs, listening to his name echo off the walls below. Here is what those echoes are relaying:
“I mean, everything,” Morikawa said when asked what Scheffler is specifically doing. “He drives the ball plenty, plenty long, well past me. Hits his irons obviously spectacular. Keeps it simple. Makes the putts when he needs to. If he doesn’t, still has plenty of chances. And just never put himself in trouble.”
“Scottie is an unbelievable golf player, and I think we all expect him to be there when it comes down to the last couple holes of a tournament,” Aberg said. “He’s proven it again and again, and I think, you know, he makes us better.”
“His commitment, his mind. He is pretty amazing at letting things roll off his back and stepping up to very difficult golf shots and treating them like their own,” Homa said. “He’s obviously a tremendous talent, but I think that is his superpower.”
They all spoke with respect, but also in dazed resignation. They had given their best and it didn’t matter, because there’s no punch that can knockout a brick wall.
That’s all well and good, and his performance over the past two years begs questions of where he might go and what he can achieve. Yet part of Scheffler’s appeal is the person behind the player. Scheffler has never been afraid to be vulnerable, to let us know he’s defined by his family and faith. He’s also a competitor with a fire that he’s unable to control. Scheffler does not enjoy how much winning consumes him yet that is his truth.
“I wish I didn’t want to win as badly as did I or as badly as I do. I think it would make the mornings easier,” Scheffler said. “But I love winning. I hate losing. I really do. And when you’re here in the biggest moments, when I’m sitting there with the lead on Sunday, I really, really want to win badly.”
Sometimes the fire burns too hot. Two years ago Scheffler admitted the gravity of what could be was too much to handle Sunday morning, stressing him out to the point where he “cried like a baby.” There were no tears this year, or worries that he wasn’t ready for what’s ahead. Yet to think Scheffler was obtuse to what was on the line is wrong. Scheffler said he was antsy, he was stressed. Scheffler said he wasn’t having fun this week, that he couldn’t, there was too much to do and he knew how hard it would be. We saw that Saturday night. Scheffler casts an imposing shadow, his 6-foot-3 height, wide frame and no-nonsense glare making him look like the guy who comes knocking on your door when rent is three months late. But when he walked off the 18th green Saturday evening, Scheffler was far from imposing, his mighty shoulders slumped by the invisible weight that comes with the supposition of greatness.
Maybe that’s why, when the final putt disappeared, we saw the usually-stoic Sheffler emote, clinching both fists down and letting out a primal scream. He took his hat off and greeted his coach, his agent, his family, his smile somehow brighter than the emerald green rolling beneath his feet. It was the silhouette of a man freed of the weight through a stubborn will only he can measure. A reminder that greatness looks easy to us because we can never know the cost of the struggle.
Scheffler began to make his way off the course, only to realize his family remained behind. Scheffler impatiently looked back and motioned for them to get going, with Scheffler’s caddie Ted Scott ultimately leading the way through the patrons. Scott had the 18th flagstick in hand, a tradition for winning caddies. With the thousands of patrons that engulfed the temporary walkaway between the 18th green and the clubhouse it looked like Scott was leading a parade with the flag in tow. Technically, he was. Golf has a new ruler, and it’s who we expected it to be.
Tip adapted from golfdigest.comi
Recipe of the Week
Lemon-Blueberry Brie Bites
24 Servings
Ingredients
- 1 tbsp. granulated sugar
- 2 tsp. finely grated lemon zest, plus more for serving
- 1 c. fresh blueberries, halved
- Cooking spray
- All-purpose flour, for surface
- 1 (8-oz.) tube crescent dough
- 8 oz. brie
- 1/3 c. roasted salted almonds, finely chopped
- Thinly sliced fresh mint leaves and honey, for serving
Instructions
- In a small bowl, using your fingertips, rub sugar and lemon zest together until sugar is fragrant. Add blueberries and toss to coat. Let sit, stirring occasionally, 10 minutes.
- Meanwhile, preheat oven to 375° and grease a 24-cup mini muffin tin with cooking spray. On a lightly floured surface, roll out crescent dough to a 12″ x 8″ square and pinch together seams. Cut into 24 (2″) squares. Place squares into prepared cups, pressing dough into bottom and up sides of cups.
- Cut brie into small pieces and place inside each cup. Spoon blueberries and any accumulated juices over brie. Top with almonds.
- Bake brie bites until dough is golden brown, about 18 minutes.
- Finely grate more lemon zest over bites. Sprinkle with mint and drizzle with honey. Serve warm.
Recipe adapted from Delish.comii
Travel Tip of the Week
One of Hawaii’s Most Controversial Attractions Is Being Demolished
Hawaii’s Ha’ikū Stairs, known more famously as the “Stairway to Heaven,” has been slated for demolition for years. Now, it’s finally being removed.
Preparatory work to remove the Ha’ikū Stairs started last week, according to the City and County of Honolulu, with plans to remove more than 600 stair modules later this month. The stairs had been slated for demolition since 2021.
“This was a decision, when we came into office, that was long overdue. Over the course of many months, in meeting with the people involved and the discovery that we put into it, I can promise you that this was not a capricious decision,” Honolulu Mayor Rick Blangiardi said in a statement. “This decision that was made was predicated upon our respect for the people who live in and around the entrance to the stairs … and our respect for both the future and the past history of the culture of the Haʻikū community.”
The stairs, built by the U.S. Navy in the 1940s, have been officially closed to the public since 1987, but that hasn’t stopped hikers from climbing them — and often wandering through people’s private property to access them — for some of the island’s best views.
Officials warned would-be climbers that the stairs are now part of an active work site and “present an immediate safety threat for anyone trespassing along the trail.”
To remove the stairs once and for all, the city said officials will go section-by-section, working with a biologist to evaluate each section before it is demolished “in order to protect native species and prevent erosion.” The removal company will then have to revegetate impacted areas with native plants when necessary. The total cost to remove the stairs is just over $2.5 million. The project is expected to last six months.
Tip adapted from travelandleisure.comiii
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Sources:
Rebalance Your Portfolio To Stay on Track
When to rebalance your portfolio
Rebalancing your portfolio: What that means and how often to do it
How to Rebalance Your Portfolio
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Please review Ballentine Capital Advisors Disclosure Brochure for a complete explanation of fees. Investing involves risks. Investments are not guaranteed and may lose value.
This material is prepared by Ballentine Capital Advisors for informational purposes only. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation or any particular security, strategy, or investment product.
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i https://www.golfdigest.com/story/scottie-scheffler-wins-masters-2024-augusta-national
ii https://www.delish.com/cooking/recipe-ideas/a60233334/lemon-blueberry-brie-bites-recipe/
iii https://www.travelandleisure.com/oahu-demolishes-stairway-to-heaven-8634139
