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Here are four strategies torebalance your portfolio in the new year.
Simultaneously, youd be reinvesting the money into the underperforming sectors of your allocation, or buying low.
Incorporate Your Tax-Advantaged Accounts
A difficulty investors face when rebalancing is taxes.
If an investor sells an asset for a gain, they have to pay capital gains taxes.
That way, any positions you sell will not trigger tax consequences.
Imagine, for example, that your IRA has $100,000 equally balanced betweenstocks and bonds.
Then you’re free to maintain your overall blend without paying taxes on your rebalance.
Another option to rebalance, according toVanguard, is to direct new purchases in taxable accounts into underweight categories.
Rebalancing with an international allocation can potentially reduce your portfolios volatility while increasing its return.
Meanwhile, youll also fulfill your RMD requirement.
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