Investing risk and rebalancing

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.

To change your investment portfolio’s risk level, there are two things you can do. 

1. Extend or decrease the timeline of your goal. At Ellevest, the allocation of your portfolio is determined by the timeline for each of your goals. Generally speaking, the longer your goal timeline, the more aggressive your asset allocation, and vice versa. This is because shorter timelines can’t afford as much risk as longer ones.
• To do this, navigate to Investing > Your goal of choice, and click Edit Goal.
2. Update the risk level of your goal. 
• To do this, navigate to Investing > Your goal of choice. Scroll down to What Am I Invested In? and click on the link under Risk Level.

Learn more about capital gains and losses.