ShmoopTube

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finance a la shmoop what does it mean to rebalance an account alright people

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here's your account pretty broad-based equity portfolio and pretty pie chart -

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they're nice going there editor's 17% bank and insurance 14%

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telecommunications 9% consumer comestibles 6% drugs legal ones 11%

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chemicals in commodities 8% transport and whoa 35% tech well just five years

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ago Tech was only 15 percent of your portfolio and it performs better than

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double the returns of the rest of the market in that time period so Wow what

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time is it need a high tech watch to answer no its rebalancing time why well

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because you want to just compound at market rates and yes Tech has been

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amazing and wonderful and loving but Tech can get crushed in bad times as

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well and the huge 37% exposure to it is well keeping you up at night and it's

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see it's gotten up 2% there since we started this video it's just too much [girl waking up in bed at night]

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risk attributed to one relatively narrow area of the investing economy even [pie with a risk tag on it]

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though it touches everything well you're thinking about making tech more

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representative of a balanced broad S&P 500 index fund where in that fund it [S&P 500 document]

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represents on only say 11 or 12 percent so you sell some Apple you sell some

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Google you sell some Amazon Facebook Netflix Microsoft and you buy a [company logos]

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smattering of high dividend high yielding defensive stocks like Chevron [military plane flying]

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for Dow Chemical and Bank of America it's kind of defensive in practice [company logos]

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portfolio managers rebalance their portfolios all the time so they

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represent the promise they made to investors when they raise the money in [scale with tech out-weighted by diverse products]

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the first place to be a fully diversified fund taking only market risk

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in the process and if they still need to do any rebalancing beyond that and well [people doing yoga in park]

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then they just enroll in a hot yoga class

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