When a Balanced Portfolio Isn't Best: Strategic Alternatives

In most cases, experts would advise investors to keep a balanced portfolio. However, there are certain times when a balanced portfolio may not be in your best interest. Here are a few special reasons to avoid a balanced portfolio.

Keep the Best

When you are looking at your portfolio and evaluating the different investments, you may find that a few of your investments are still your top performers. It may not make sense for you to sell portions of your best performers to purchase other investments. In this case, you may want to hang onto your best investments.

Tax Implications

Before rebalancing your portfolio, you may want to think about the tax implications that will be involved. When you sell securities, you will have to deal with paying taxes for them in that particular year. You may want to hold onto them longer in order to avoid taxes this year or to lower the tax rate that you would have to pay. For example, if you have owned a stock for a short time, you may want to keep it in your portfolio longer so that you can pay a cheaper capital gains tax rate.