Rebalancing your portfolio to account for last year's results and your expectations of what lies ahead is only part of the process. The next part of the job is reviewing your individual investments, particularly those in stocks to make sure your portfolio is properly diversified and that you don't have too many of your financial eggs in one basket.
Ian Hunter on The Wall Street Journal Report (1/24/99)Stock trading among institutional investors is like an isometric exercise: Lots of energy is expended, but between one investment manager and another it all balances out, and the transactions costs incurred by the managers detract from performance. The other big detractor from performance is fund expenses. The biggest advantage of indexing for the taxable investor lies in its advantage of deferring or avoiding capital gains taxes.
Burton G. Malkiel and Richard E. Evans in The Case for Index Funds, an excerpt from Earn More (Sleep Better) (Link from Mutual Funds Magazine February 1999)
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