Better yet, rebalancing your portfolio at least once a year back to your original target allocation can reduce risk and even enhance returns by forcing you to buy low and sell high.
The intent of this methodology is to adjust your stock holdings back to your long-term allocation targets, not to increase or decrease them beyond those targets.
Citi stock remains 90% below its pre-crisis level (or 50% lower after adjusting for its increase in share count) and, in our view, reflects the failure of resource allocation, oversight and management that stretches back to the formation of the company in its current form in 1998.
If a portfolio has a target of 50% in stocks and 50% in bonds and market movements result in different allocation, a rebalancing would correct this mismatch back to its 50-50 target.