When we’re building your investment portfolio, one of the things we take into consideration is risk. This gives us an idea of the breakdown of stocks, bonds, and alternatives.
Generally speaking, stocks are considered riskier than bonds, so if you’re comfortable with higher risk, you’ll see more stocks in your portfolio and vice versa.
But if you change your portfolio’s risk level, it can cause a rebalance — when we reallocate the spread of stocks, bonds, and alternatives to match the new risk level.
When we do a rebalance we’re buying and selling assets in your portfolio, and we might have to sell an investment at a higher or lower price than you paid for it. That’s a capital gain or capital loss.
If that happens, you’ll need to claim capital gains or capital losses when you file your taxes.