Answers to the Rebalancing Your Nest Egg IQ Test

Natalie Pace on ABC's Good Morning America Third Hour.

Answers to the Rebalancing Your Nest Egg IQ Test
 

1. What does rebalancing mean? Rebalancing is a financial practice meaning that you’ll make sure that your current equity and fixed income holdings are in line with your goals.
2. Why do you need to rebalance? Stocks and bonds gain or lose value throughout the year(s). Regular rebalancing of a properly diversified nest egg is a buy low, sell high plan on auto-pilot.
3. How often should you rebalance? 1-3 times a year. Why? Each year you get older. As you age, you should be keeping more safe. A severe loss of principal when you are close to retirement could be devastating. More than three times a year would be overkill. You’d be more likely to make mistakes. Your nest egg should be money while you sleep, not an obsession that you have to babysit.
4. What is the easiest way to rebalance your nest egg? Print out a sample pie chart of what you “should have.” Mock up a pie chart of your current holdings and their value. Compare what you have to what you should have. Sell high in the slices that are too large. Buy low in the slices that have become slivers. Use our Free Nest Egg Pie Chart web app to help you mock up a sample pie chart of what you should have. Simply email [email protected] with FREE SAMPLE PIE CHART in the subject line.
5. What are some of the fundamentals to properly diversifying your nest egg? Always keep a percentage equal to your age safe. Overweight or underweight safe based upon market conditions. Know what is safe. (What’s hot and what’s safe changes every year.) Diversify your at-risk equity holdings into ten funds – large, mid and small caps, value and growth, and four hot industries or countries. At our Investor Educational Retreat, we also teach you how to lean into the future and make sure that you are not investing in the typewriters of yesteryear or companies that are drowning in debt, losing sales/revenue, and not making enough profit to meet their massive obligations.
6. Which assets go into your nest egg? Liquid assets, such as stocks, bonds, funds, REITs, cash, money market funds, annuities, savings, cryptocurrency, etc.
7. Which assets do not go into your nest egg? Hard assets, such as your home, income property and other real estate investments, with the exception of REITs (which are paper assets).
8. Should you invest in individual companies in your nest egg? Funds offer more protection than individual stocks. However, in 2021, if you choose to invest in a few trillion-dollar multinational companies in your large cap slices, you can make a case for that.
9. What is the difference between value and growth? Value funds should have companies that are on sale. Growth funds include companies that are experiencing strong sales/revenue growth.
10. What is the difference between small, mid and large cap funds? Small companies typically offer better performance. Trillion-dollar companies offer stability.
11. Why do we evaluate the funds we own? There are many reasons to know what you own. You can lean into the products and services of tomorrow, and avoid last-century products and companies. You can begin to transition into putting your money where your heart is, and ensuring  that you are not profiting from polluters. Blind faith has been a Wall Street rollercoaster. Having to use the bull markets to recover from losses is not a solid strategy. Most investors are worth less today than they were in 1995, due to the massive corrections of the 21st-Century, combined with broker fees and commissions.  
12. What kind of funds do we want to avoid? Some funds are filled with debt-laden, slow-growth companies that are paying high dividends to keep investors interested. Just as with bonds, the higher the dividend the higher the risk of loss of principal.
13. What kind of funds do we want to own? The fund company should be a creditworthy company that has been around for decades and is managed by a respected CEO. When diversifying, we can include foreign countries.
14. What is an “everything and the kitchen sink” fund? Is this a fund we want to own? Why or why not? These are funds (like target date retirement funds) that try to do everything in one fund. These were designed for a Buy & Hold strategy – a last-century game plan that hasn’t worked in the 21st Century.
15. When do we switch out funds and pick something new? What’s hot changes every year. So, evaluate your hot slices when you do your rebalancing. If you have made any substitutions, then you might consider going back to the tried and true plan, once the replacement strategy is no longer needed.
16. What are some key dates to consider rebalancing? Why? September is historically the worst performing month. The Santa and Spring Rallies are typically the strongest. So, you might find some Back to School Stock Sales (fund sales) at the end of September. January and May might be good profit-taking rebalancing times.
17. What kind of return are you aiming to achieve in your nest egg? 10% annualized gains. The Buy & Hope system has been losing more than half in recessions, and using the bull markets to make up losses. Annual rebalancing with proper diversification is a buy low, sell high, keep your wealth strategy on auto-pilot, and is the only way to achieve steady gains in a world where recessions look more like Depressions. In 2021, the safe side of your nest egg is likely to underperform. Bonds are illiquid and negatitve yielding. This won’t be forever. But it’s important to know current market conditions.
18. How can limit orders help your rebalancing? With a little math, and an optimistic (and sometimes outlandish) target price, a limit order can sell high for you, even if you are on vacation in Antarctica.
19. How do you determine your limit sell order price? The equity side of your nest egg  is where you take on higher risk for higher gain (and why you lean into fixed income as you age). The hot slices are ideally super performers. So, you want to be sure that your limit orders are set higher than the gain you hope to achieve. (In 2021, we’ve seen several Shoot the Moon performers with unbelievable, short-lived gains.) If the share price hits the limit sell price, your slice will automatically rebalance (sell high) with the limit order. At the rebalancing session, you can always change any limit order to a market order to trim back hefty slices.
20. What is the difference between a “Stop Loss” mindset and a “Capture Gains” mindset? With the pie chart system, you are protected because you are keeping an appropriate amount safe. If market conditions are perilous, overweight more safe. There is no need to set a stop loss to protect yourself because you are already protected. That allows you to instead adopt a “Capture Gains” winning game plan. In a volatile market, if you set stop losses, you can be losing time and again. On the flip side, if you are anticipating the volatility and setting optimistic sell prices, you might be winning over and over again.  

Of course, the devil is in the details. Implementing this strategy will be easier if you attend our Investor Educational Retreat June 4-6, 2021, and then take our next Rebalancing Master Class. We’re currently on schedule for April 30, 2022 as the next Rebalancing Master Class (online). However, if there is enough demand, then we’ll consider hosting one on Saturday, June 12, 2021. Call 310-430-2397 or email [email protected] to learn more.
 
 
Email info @ NataliePace.com or call 310-430-2397 if you have any questions about this test, or about the answers, or if you are interested in learning time-proven investing, budgeting, debt reduction, home buying solutions that will transform your life.

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Natalie Pace Financial Empowerment Retreat. June 4-6, 2021. Call 310-430-2397 or email [email protected] to learn more. Receive the best price when you register by May 15, 2021.

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Important Disclaimers
Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.

ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.  

Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.

About Natalie Pace
Natalie Wynne Pace is an Advocate for Sustainability, Financial Literacy & Women's Empowerment. She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 4th edition of The ABCs of Money was released on October 17, 2020. 

Natalie Pace's easy as a pie chart nest egg strategies earned gains in the last two recessions and have outperformed the bull markets in between. That is why her Investor Educational Retreats, books and private coaching are enthusiastically recommended by Nobel Prize winning economist Gary S. Becker, TD AMERITRADE chairman Joe Moglia, Kay Koplovitz and many Main Street investors who have transformed their lives using her Thrive Budget and investing strategies. Click to view a video testimonial from Nilo Bolden. 

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