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2013: a Good Year for Investors

posted Jan 7, 2014, 3:35 PM by Tim Isbell   [ updated Jan 8, 2014, 1:59 PM ]

by Tim Isbell

The stock market rose about 30% in 2013. The bond market lost about 1.5%, the result of interest rates ticking up mid-year. So investors with any sort of balanced asset allocation portfolio enjoyed a great year.

If you started out 2013 with your asset allocation tuned to fit your risk tolerance, it is out of balance now. Your percentage of stocks is sure to be above its target, and your percentage of bonds below its target. So it's time to sell some stock shares to buy some bond shares. It's always hard to sell an asset that just did well in order to buy an asset that has lost money. But this is how smart investors operate. In the long run it turns out this is how they buy low and sell high. If you need a reminder about how all this works, take a second look through the Personal Finance webpage. I revised it and updated the data to reflect 2013.  Also, I hope you'll take time to read through the Asset Allocation page again. It was a bit on the complex side so I spent some time simplifying it. If you need a place to get started, take a look at the $6,000 Portfolio. With just that much money you can purchase 2 funds that will become your building blocks for the future.

A few days ago the mail-woman brought me the January/February 2014 edition of CNN_Money magazine. It includes an Investments Guide in which the first article is titled "Winning Made Simple." It is a great example of why I recommended this magazine in the Resources/Links webpage. I encourage  you to go the a magazine rack in a store or your local library and take time to read it. The advice will help you rebalance your portfolio in today's challenging market.

As long as I'm recommending good reading, here's a link from an article by Daniel Solin, another of my favorite personal finance writers: Reflections on 2013 and Beyond.