After years of outsized stock market returns, it's time to reassess your portfolio ‘risk exposure,' top-ranked advisor says

Core Insights - The stock market has experienced significant gains in recent years, with major indexes like the S&P, Dow, and Nasdaq showing increases of approximately 15.1%, 10.6%, and 20.9% respectively this year, despite a recent decline due to AI stock valuations [2] - The S&P index has surged by about 90% since mid-October 2022, while the Dow and Nasdaq have gained approximately 61% and 126% respectively, leading some experts to suggest that the market may be overpriced and due for a correction [3] Portfolio Management - Financial advisors recommend that investors rebalance their portfolios to restore intended asset allocation, particularly if they have not done so recently [4] - Investors are advised to assess their risk exposure and consider selling down riskier assets, as many may have too much in equities and not enough in safer assets [5] - A failure to rebalance can lead to an unintentional shift in asset allocation, such as a portfolio moving from a 60% stocks and 40% bonds ratio to a 90% stocks and 10% bonds ratio, increasing volatility and risk [6] Risk Considerations - For those nearing retirement, the potential impact of a market downturn is significant, as they may not have the time to recover from losses [9] - Advisors suggest taking action while market prices are high, recommending that investors take some profits and allocate them to safer investments [10] Rebalancing Strategy - A systematic rebalancing strategy can help investors manage emotions and make informed decisions, allowing them to sell high and buy low [11] - Rebalancing can also assist with tax planning, as selling stocks held for less than a year incurs higher tax rates compared to long-term gains [12] - Many financial advisors recommend rebalancing at least once a year, with some suggesting more frequent reviews of risk exposure and investment goals [13]