November 2009
Top Ten Financial To Do’s Before Year’s End
1. Review your portfolio and rebalance, if necessary
Major market swings like the ones we’ve seen in the market recently can cause your investment allocations to shift. By rebalancing, you can restore your target allocation, manage investment risk, and keep your portfolio in good health. For example, say the asset allocation mix for a 30 year-old is 70% stock and 30% bond. But given the great run in stocks this year, that mix has moved to 80%/20%. Well, she should sell 10% of her stocks and use the proceeds to buy bonds. In a way, you’re always selling high and buying low.
Mental Quirks that Lead to Bad Decisions
The human brain is amazingly complex, flexible and able to process a vast amount of information. Even today’s supercomputers are not up to the task as far as raw processing power. The human brain has them beat…at least for the moment. But past these amazing stats and processing power, the human brain is also subject to some very real, emotional, limitations. We haven’t yet evolved that much past cavemen despite our technological advancement.
