Time to rebalance?

NEW YORK – Investors worried that their portfolios are not only endangered from the sell-off on Wall Street but are also out of balance may need to consider making changes. The bear market has left some investors with too much money concentrated in certain areas of the market and too little in others.

A properly balanced portfolio can mean a mix of stocks, bonds, cash and perhaps hard assets such as gold. Trimming one area that grows too quickly can help investors avoid staying in overheated corners of the market and snap up bargains in other areas. The goal is a balance of assets that aren’t overly correlated to one another, meaning that when one asset class goes down, another tends to go up.

“It’s never too late to try to improve the balance within your portfolio. One never knows if the market is going to start picking back up or if it’s going to continue going down,” said J. Bryant Evans, a portfolio manager and investment adviser at Cozad Asset Management in Champaign, Ill.

Evans doesn’t call for a broad rearrangement, but said investors might consider increasing their exposure to defensive areas like dividend-paying stocks. He also said they might consider adding to their range of fixed-income investments, such as municipal bonds. He warned, however, that with demand for safe-haven investments like Treasury bills already high, a rush to defensive corners of the market can mean investors might be putting money into an area poised for a pullback.

He contends investors looking for a range of investments in the fixed-income space should not only consider the safest holdings like government bonds and CDs but also perhaps some small exposure to other parts of the market, even areas that have been beaten down like corporate debt.

Evans also said investors should seek some of the same balance in their stock investments though consider hewing to more defensive areas like stocks with reliable dividend records, such as utilities.

Brian Kazanchy, chairman of the investment committee at Regent Atlantic Capital in Morristown, N.J., said the fear created by the market’s decline in the past year has made it hard for some investors to consider selling stronger parts of their portfolio.

“It’s a really difficult thing to do because you’re mostly selling your bonds that have likely held up well,” he said.

William Baldwin, president of Pillar Financial Advisors in Waltham, Mass., said that while stocks are on sale given the drops of more than 30 percent in the major indexes like the Standard & Poor’s 500 index since last October, the jittery markets don’t make it a good time to make big changes to a portfolio.

Baldwin contends the fear blanketing the markets has led to irrational moves and that many investors, before making any changes to their portfolio, would benefit from reassessing how much risk they are willing to take.

“If you’re really nervous the thing to do is not to sell everything but to start doing your financial planning again and develop an allocation going forward,” he said.