From CNBC: 2025-01-03 12:44:07

Stocks soared in 2024, with the S&P 500 gaining 23%. Long-term investors may need to rebalance portfolios due to skewed stock-to-bond ratios. Financial advisors recommend aligning portfolios with long-term goals to manage risk appropriately.

Portfolio rebalancing involves adjusting asset allocations to meet targets. Consider selling stocks to buy bonds if the mix is off. Experts advise setting investment targets and regularly monitoring allocations to maintain a balanced portfolio. Wall Street managers routinely rebalance portfolios to ensure prudent investing.

In 2024, there was a significant gap in market fortunes, with tech stocks outperforming other sectors. The Magnificent 7 tech stocks led the S&P 500 gains. Non-U.S. stocks underperformed, highlighting the need for investors to review and potentially adjust their tech investments for a balanced portfolio.

Investors should not overlook tax implications when rebalancing portfolios. Utilize automatic tools in 401(k) plans or professional money managers in mutual funds for efficient rebalancing. Consider tax consequences for taxable accounts to avoid triggering unnecessary capital gains taxes. Retirement accounts like 401(k)s and IRAs generally do not face the same tax concerns.

Read more: How to rebalance your portfolio after lofty stock returns in 2024