For everyone who is investing, you will have a risk tolerance. So remember to rebalance your portfolio to ensure that it fits for risk tolerance.
For instance, you are quite risk averse and love to have 70% in bonds as they are the safest asset but with small returns. You also have 30% in equities.
After investing for 5 years, your percentage might have changed to 50% bonds and 50% equities as you have got a bigger growth in your equities investment. So you should then rebalance by taking out a portion of your equities and put it into bonds to balance it back to the 70:30 ratio.
However, it is good to note that your risk tolerance might have changed and you want to keep the ratio you have.
For instance, you are quite risk averse and love to have 70% in bonds as they are the safest asset but with small returns. You also have 30% in equities.
After investing for 5 years, your percentage might have changed to 50% bonds and 50% equities as you have got a bigger growth in your equities investment. So you should then rebalance by taking out a portion of your equities and put it into bonds to balance it back to the 70:30 ratio.
However, it is good to note that your risk tolerance might have changed and you want to keep the ratio you have.
