Don't put all your eggs in one basket!
We have all heard this adage, and it's simple when you begin, but the solution to keeping your eggs safe over the long haul is a bit more complicated than you may think.
Splitting your eggs (investment capital) between more than one basket (investment vehicles) is a good way to start any portfolio, but it's just as important to monitor the performance of your different investments over time, because your baskets change, and you can end up with more eggs in a basket than you might be aware of, and too few in another.
Since the value of different "eggs" changes over time as markets ebb and flow, your investment portfolio can end up looking lopsided. This type of portfolio is said to be "unbalanced," even if it was "balanced" when it was created. The key to maintaining a healthy portfolio, then, is to rebalance the assets as their values change.
For example, if Basket A grows from 5 eggs to 8, and Basket B shrinks from 5 eggs to 2, you need to move some eggs from Basket A to Basket B to maintain your initial diversified position, and restore portfolio balance. This strategy is designed to reduce risks, increase gains, and protect your investment portfolio over the long-term.