Coronavirus Crisis: Why You Should Be Rebalancing Your Portfolio Right Now

Why You Should Rebalance Your Portolio

We are in the middle of a market and health crisis right now and it’s things like that that cause markets to crash every ten years or so. It’s thinks like that that give you amazing opportunities to buy quality assets at low prices/valuations. It’s almost impossible to get the timing exactly right when it comes to markets, but you can get Right now is a great time to rebalance your porftolio. It will take some courage to invest money into this market or to rebalance, most people are selling (which is why markets are down), so if you’re not one of those people, congrats to you and consider rebalancing.

How Rebalancing During A Crisis Will Help You

Rebalancing your portfolio will help you do two things, mainly. It will help you lose less during the down market and recover from the down market faster than if you didn’t touch it.

Check out this chart, courtesy of Morningstar.com:

So if you rebalanced in the years leading up to and during the 2008 financial crisis, you saved yourself 5% in losses compared to if you didn’t and you recovered your losses 6 months faster.

It’s even more impressive when looking at the 2000 tech bubble crisis. You saved yourself almost 8% in losses and recovered almost TWO YEARS FASTER!

Every crisis is different, but I would argue that it would make sense to consider rebalancing. Doing so is literally the act of buying low and selling high. Typically bonds are up during down markets and stocks are down; so when you exchange some of your bonds for some of your stocks, you’re literally buying low and selling high.