Balancing Your Portfolio
Radio Transcript, 2 minutes 25 seconds, for use during week
of September 3.
Description: Ira, Susan, and Penny talk about asset allocation
and the importance of monitoring your portfolio and rebalancing
Announcer: Invest Wisely comes to you from Iowa State University
Extension through a grant from the Investor Protection Trust,
providing investor education on the web at: investorprotection.org.
Susan: Penny, we talked about how important asset allocation
is and that Ira and I might want to have different levels of
stocks, bonds, cash and other investments in our portfolios because
we have different goals and are at different life stages.
Penny: That’s exactly right. Generally, the younger
you are, the more risk you can afford and you may choose to have
a higher percentage of your portfolio in stocks. As you
get closer to retirement or actually retire as Ira has, you’ll
want to reconsider your investment goals and, perhaps, adjust
your mix of assets.
Ira: So my stage in life can be one factor in determining my
Penny: You’ll also want to consider changing your asset
allocation when there are changes in your risk tolerance, in
your financial situation, or in your financial goals. And
then . . . at least once a year check to see if your investments
are still in line with your plan.
Susan: What do you mean?
Penny: It’s important to periodically monitor your portfolio
and rebalance it if necessary. Some of your investments
will grow faster than others. For example, if you have
an asset allocation strategy where stock investments are to comprise
40% of your portfolio but because of the rise in the stock market,
it’s now 55% of your portfolio, you’ll want to make
adjustments to maintain your original allocation.
Ira: So, in that situation, I might want to sell some of my
stock investments and purchase additional investments in other
categories, say, bonds or cash?
Penny: Yes. Or you might leave your stock investments
as they are but use additional money to purchase securities in
investments categories that are now underweighted in your portfolio.
Susan: So, we want to decide on the best asset allocation for
our particular situation and we also will want to periodically
review our portfolios to maintain that asset allocation.
Penny: Yes. And remember, for more information, visit
the ISU Extension website at extension.iastate.edu and look for ‘Invest