The Canada S&P/TSX Toronto Stock Market Index reached an all-time high of 16567.42 in July of 2018, just one example in a series of record-setting returns in equity markets around the world. Indeed, the MSCI World Equity Index added $8 trillion in value in 2017.1 For equity fund investors, that represents a reason to celebrate, but it also means that it may be time to rebalance your portfolio.

Suppose, for example, that your portfolio target was 50% equities and 50% fixed income. The out performance of equity funds or the equity portion of your portfolio may mean that it no longer has the 50/50 split that aligns with your objectives and risk tolerance.

Options to rebalance

You could rebalance by taking profits in select equity holdings and reinvesting in fixed income. However, that could leave you next income tax return, unless your holdings are in a registered account. A more tax-friendly way to rebalance is simply to direct new money to underweight areas in your portfolio.

This strategy has an added benefit in that underweight asset classes may be undervalued and thus represent a good investment opportunity.

Stay on top of changing markets

A regular investment program, where you automatically direct cash to your mutual fund portfolio, is an ideal way to take advantage of current market conditions and keep your portfolio on track. If you’re adding to your non-registered investments soon, let’s review the areas that are outperforming and consider the best places to allocate new cash.

1 Trading Economics, cited in Financial Post, December 29, 2017