DeloriEs Jones, senior vice-president of sales and marketing at JN Fund Managers, is encouraging investors to use the new year to reassess their portfolios, ensuring they align with their financial goals and risk tolerance.

She noted that market fluctuations, economic shifts, and personal financial changes can all impact asset allocations, making regular portfolio rebalancing essential. She outlines five steps investors can effectively take to rebalance their portfolio for the year ahead.

1) Assess Your Current Portfolio

Before making any changes, take stock of your current portfolio. Review your asset allocation to see if it has drifted from your original investment strategy. Check the performance of various asset classes, stocks, bonds, real estate, and alternative investments to determine any significant imbalances.

2) Re-evaluate Financial Goals

Life circumstances change over time. Whether you’re nearing retirement, planning for a major purchase, or adjusting to changes in income, reassess your financial objectives. Also consider your risk tolerance as this may change over time—if market volatility in the past year made you uneasy, you might want to shift towards more conservative investments.

3) Trim Overperforming Assets

If necessary, you may need to trim/sell overperforming assets to realign with your strategic allocation or your adjusted allocation emerging out of step 2. While over-performing assets are beneficial, they can outweigh your portfolio in a particular sector or asset class. Selling a portion of overperforming assets allows you to lock in gains on these assets. You may then use some of the proceeds, from the asset sale, to reinvest in the underperforming assets leading to a lowering of your average costs for those assets and realign to your strategic allocation and help to maintain a diversified portfolio.

4) Reallocate to Undervalued Sectors

As certain sectors may be undervalued due to market conditions, consider reallocating some of the proceeds of the asset sales to capitalise on future growth potential. For example, if technology stocks surged while energy stocks lagged, you might shift some funds to take advantage of the buying opportunity and position your portfolio for a potential energy sector recovery.

5) Automate Future Rebalancing

Many broking firms and financial advisors offer automatic rebalancing features. Setting up periodic rebalancing — whether quarterly, semi-annually, or annually — can help maintain your desired asset allocation without constant monitoring.

Jones noted that if the investor is unsure about rebalancing strategies, consulting a financial advisor can provide personalised insights.

“A professional can help you align your portfolio with your long-term goals. Rebalancing your investment portfolio is a crucial step in maintaining a well-diversified and goal-orientated investment strategy. By taking the time to review your assets, adjust for risk tolerance, and strategically reallocate funds, you position yourself for a financially successful new year,” she said.