'Rebalancing during this pullback is a great idea': 6 questions to ask your financial adviser right now as stocks continue to tumble

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Thinking about rebalancing your portfolio as stock market losses extend? 6 questions to ask first

First, consider this general guide on investing: it’s about playing the long game instead of hyperventilating over headlines and doing something drastic, financial advisers say.Investors, especially newer ones, are getting tested by a convulsive stock market that keeps shedding value... First, consider this general guide on investing: it’s about playing the long game instead of hyperventilating over headlines and doing something drastic, financial advisers say.

Rebalancing comes down to three elements, said Trey Bize, of First Allied in Oklahoma City, Ok. Determine stock and bond allocations based on risk tolerance and financial goals. Figure out the holdings on the stocks and bond side. Decide what amount of upward or downward “drift” in holdings’ value to allow before rebalancing, he noted.

Pouring money into funds tracking stock market benchmarks are not an end in themselves, said Erika Safran of Safran Wealth Advisors in New York. — Erika Safran of Safran Wealth Advisors in New York “Investing in index funds is a vehicle for investing, not an investment strategy,” she said. “Your investment strategy will dictate how much you invest in various indexes and this will be the primary impact on portfolio performance.

If I don’t put my money in index funds, where should I put it now — and how much? There’s no one answer to the question, many advisers noted. It’s guided by an investor’s goals, appetite for risk, how long they want their money in the market and other person-by-person variables, they said. How much money should I put in fixed income? There’s the traditional 60/40 portfolio devoting 60% to stocks and 40% to bonds. The approach has its supporters and critics now, but whatever the allocation, advisers say there are a couple things to remember about fixed income when interest rates are rising.

Then there’s junk, or high-yield bonds, which “tend to behave more like stocks,” he said. Example: debt from Carvana CVNA and Coinbase COIN fell in the high-yield markets Wednesday after news from Carvana about layoffs and earnings reports from Coinbase showing lower than expected revenue and the loss of 2.2 million crypto traders.Do I cut my losses and get out of the stock market now? No, many advisers said — but with some caveats thrown in.

What should I remember if I want to buy the dip on some stocks? Start with some humility, said Thomas Duffy of Jersey Shore Financial Advisors. “There is no rule that says the dip you bought was the lowest dip there will be. Be prepared to be wrong,” he said.

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