Each investor has different needs or individual circumstances which can change due to several reasons.  These include change in wealth, time horizon, liquidity needs, tax circumstance, change in legal consideration or unique individual needs which may arise and can lead to needed changes in a portfolio allocation.  Not to mention, markets are always moving and unpredictable which can also lead to change in a portfolio’s allocation.  Rebalancing ensures the portfolio remains as intended, making it essential to any investor. 

“There is no perfect formula to construct the optimal portfolio”

Rather than scheduling an annual or quarterly rebalancing which can result in wasteful transaction costs.  Consider a percentage threshold which is neither too broad nor too narrow.  Try not to have the thresholds too wide that would cause lost opportunities. 

There is no perfect formula to construct the optimal portfolio.  However, with the future being uncertain, an investor should aim to diversify their investment and not have it all in one asset class.  This allows the investor to limit their risk.

Diversification and alternative investments can help hedge against unsystematic risk in a portfolio.  The recommended percentage is to have between 10 to 20 percent of alternative investments in your portfolio. 

Overall, rebalancing can be a complicated process but nonetheless, a necessary one.  It is important to set thresholds that are not too broad or too narrow when rebalancing as it can cause unnecessary or excessive fees and it can expose the investment to extremes.   Investors who do their research and ensure their portfolio is well diversified and aligned to their long-term goal are on the best track to consistent long-term growth and happiness! 

If there’s anything many college students share in common, it’s being broke from time to time. So why on earth should we bring up investment? As counterintuitive as it may sound, now is the perfect time to start investing. This post explores why you should become a student investor.

• The Power of Compound Interest

You’ve probably heard, learned, or read about it thousands of times. One of the major factors that affect compound interest is time. Let’s assume you’re able to save $20 every week and decide to invest it in a low-risk market index like S&P 500 with an average annual interest of 10%. That works out to be about $1,000 yearly. If you start college by age 17 and retire by age 67, you will make $1,161,600. All the money you have contributed towards retirement is $50,000. That’s over $1.1 million in profits.

Now, let’s assume you wait till you’re 22 before you start investing, all other factors being equal, you’ll make $790,0231. All the money you have contributed will be 45,000 and your profit will be about $750,000. Pretty impressive, right?

But look at the numbers carefully, just because you failed to invest $5,000 while in college, it accrued to over $370,000 in losses. You see why you have to take investing seriously now.

To secure your financial future, you have to become a student investor.

• You Have Lower Financial Responsibility

The majority of college students are typically unmarried. Heck, you might even be receiving financial support from your parents. Couple that with the fact that about 70% to 80% of college students work while attending school. So, it’s easy for you to squeeze out money for investing.

Moreover investing for beginners can be a risky endeavor, especially if you’re looking into obtaining higher rewards. By investing in riskier stocks, you can make buttloads of money, but you can also lose money.

When you have kids or mortgages to worry about some years down the line, taking those risks would not be wise. Now that you have more disposable income, use it to explore the world of investing.

• Paying For College Debts

College loans are one of the biggest problems that haunt down college graduates for years. While it’s prudent to pay off your college loans as soon as possible, it shouldn’t be done at the expense of investing. Why? Because the interest rates for federal student loans are way lower than that for many low-risk investments. This means that your debt accrues at a far lower rate when compared to the gains you can get from investing.

So, the best strategy is to do both. Profits from your investments can be used to cover part of your student debt in the future.

To secure your financial future, you have to become a student investor. As you’ve seen, your decision to postpone investing will impact you negatively in the long run. Now is the right time to learn about investing for beginners. Sharpen your investment knowledge and skill as you navigate the complex world in investing. Remember, your financial future rests in your hands.