Making Money Minute with Ron Hiebert - The Tax Benefits of Rebalancing

Rebalancing is a technique where you adjust the asset weightings in a portfolio - usually on an annual basis. It is beneficial for two reasons. Rebalancing gets you to sell asset classes that have outperformed and add to those that haven’t done as well - in other words sell high and buy low. It also allows you to tax harvest by selling some of the losers in the portfolio. Writing the winners off against these losers has proved beneficial from a performance perspective. Periodic tax harvesting lowers taxes, and has been shown over the long term, to add between 3/4’s of a percent to a percent and a half to annual returns.

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