Once the appropriate allocation strategy is in place, investors need a well-defined plan for rebalancing.  When market movement causes an individual asset class to deviate too far from its target within the portfolio – and therefore the overall risk profile of the portfolio to no longer match the investor’s needs – the necessary trades must be placed (remaining cognizant of transaction costs and tax implications) to bring the portfolio back in line.

An investor’s allocation should reflect his or her financial situation, and not his or her prediction about the direction of markets.  While it would be nice to participate in bull markets and to sidestep declines, “market timing” has been repeatedly proven impossible.  Develop a thoughtful plan for asset allocation, and do not allow predictions or emotions to alter that plan