I have a confession to make: I don’t rebalance my portfolio regularly. It’s hard to sell your winners when the stock market keeps going up. And I’m not that worried about a crash since I’m not on the cusp of retirement.
Rebalancing makes a lot of sense, though, and it’s especially important today. The S&P 500 index has been rising for years, largely fueled by excitement about artificial intelligence. Your portfolio may now be far from balanced, with the bond portion shrinking relative to stocks.
Moreover, you may be inadvertently loaded with technology and communications stocks due to their high concentration in the S&P 500—accounting for more than 40% of the index. Any slowdown in AI threatens your whole portfolio.