As time goes by, the need for balance in our lives becomes increasingly important. We must maintain a work – life balance to take care of career, family, and self. We need to maintain a balanced budget to make sure we prioritize what we want, what we need, and what we must save for the future. And of course, we need a balanced diet to curtail eating some of the comfort foods we love to ensure health and longevity. It’s a balancing act worthy of the Flying Wallendas.
The same could be said for our investment portfolios. The idea of optimizing a portfolio to maximize return based upon an investor’s comfort level with risk is as intuitive as balancing your checkbook, or your diet. It can also present similar challenges. Often investors will look to abandon their fixed income allocations when yields are low, when they think rates are set to rise, or when outsized opportunities for gain and/or higher yields present themselves in other income producing investments.