Beginners' Guide to Asset Allocation, Diversification, and Rebalancing

The Securities and Exchange Commission has a great article regarding the importance of sticking to your asset allocation. Rebalancing your asset allocation occurs when your current asset allocation is no longer inline with your target asset allocation. This generally happens when one asset category performs well. Rebalancing means taking assets from well performing over-weighted categories and reallocating them to the under-weighted categories. This may seem counterintuitive but it can significantly reduce your risk and bring your risk back to a level you are comfortable with.

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