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#5 Monitor and exit

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Lesson time
2 min.

In this lesson you will learn 💸

  • How and when to monitor your investments
     
  • How to exit your investments

Let's start with a quiz 🎯

What does 'rebalancing' a portfolio mean?

😕 That's unfortunately not correct!

Rebalancing is the process of changing the weightings of assets in your portfolio so it keeps its original shape and allocation and has a good fit for your risk profile.

👏 Correct!

As the values of your assets change, inevitably the original mix will change due to the differing returns. This will change the risk profile of your portfolio.

👏 Correct!

As the values of your assets change, inevitably the original mix will change due to the differing returns. This will change the risk profile of your portfolio.

How often should I rebalance my portfolio?

This is a very personal decision.

  • If you work with a robo-advisor, then it will rebalance your portfolio automatically.
     
  • If you manage all your investments yourself, you should re-balance your portfolio at least once a year, or when some of your investments have significantly changed in value.

 

What are other reasons to change the composition of my portfolio?

Some of the reasons might be:

  • Maybe your financial situation has changed or you have gained experience and therefore want to adapt
     
  • The economic situation changes and with this your appetite for risk
     
  • You want to exit your investments in the near future
     
  • You want to implement new themes, industries or align your portfolio with your value

What ever the reason, please bear in mind that changing your portfolio has cost and potentially tax implications. You therefore should do it for a good reason, such as the risk you are willing to take has changed. And not every month😉.

One of the things I had to learn when investing is patience.

Author
Olga

When do I exit my investments?

There are different reasons why you might think of exiting your investments:

  • You need the money, for example when you are about to retire
     
  • You have achieved your financial goal
     
  • You have set yourself a fixed timeframe (e.g. 10 years) and the time is up
     
  • You find yourself in a difficult situation. If this happens, your safety fund should be your first resource, but sometimes life is unpredictable....
     
  • The investment is not performing well or costing you too much

How do I exit my investments?

If it is an emergency, then you might have no other choice than to sell.

If you exit because it was not performing well or costing you too much, then change quickly. The costs associated with the change usually are compensated with the savings on fees or better performance over time.

For all other reasons:

  1. Gradually reduce the risk out of your portfolio to make what you'll get more reliable. This means you have to change the allocation.
     
  2. When the time comes, sell and reap out the benefits.

Tip📌

If you are not in an emergency nor in a hurry, selling part of the amount and keeping part still invested can be a good strategy. Same goes for times of high uncertainty.

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