Six may represent the bottom, 12 may represent the peak of a market cycle.

Six could represent the bottom of a market cycle. Twelve could represent the peak of a market cycle. Three could represent a decline and nine could represent recovery.

According to an investing study from Davis Advisors, the average stock-holding mutual fund returned 9.9% annualized from 1991 to 2010, but the average fund owner earned only 3.8% on average per year.

Too many people buy near the peak and sell near the bottom. They know it should be the other way around. Buy low, sell high is easier to say than do. Periodic rebalancing may be an easier way to remain disciplined.

Why is it important to rebalance a portfolio? Failing to rebalance a portfolio can result in a shift toward a more aggressive allocation, higher beta, over time due to compounding. For example, a balance model portfolio with an initial allocation of 50/50 between equities and fixed income may become more aggressive because stocks outperform bonds over time (but not every time). Accordingly, the percentage allocated to stocks tends to increase over the years. Generally, a portfolio should not become more and more aggressive as one approaches their retirement.

An income immunization strategy may help investors determine the proper mix of holdings for their, individual needs. This can be done by setting the duration of the portfolio equal to the time horizon. The plan for income may be coordinated with Social Security and Required Minimum Distributions (RMDs).

There is no way to avoid all risks all of the time. Holding cash protects against principal decline, for example, in exchange for inflation risk. Whatever your risk tolerance, it is important to efficiently pursue the highest possible return commensurate with the level of volatility you're willing to tolerate.

Securities offered through Lion Street Financial, LLC (LSF), member FINRA, SIPC. Investment advisory products and services offered through Lion Street Advisors, LLC (LSA), an investment advisor registered with the Securities and Exchange Commission (SEC). LSF and LSA are affiliated companies and do not provide tax or legal advice, nor does Income & Estate Planning. This is published for residents of the United States only. Representatives may only conduct business with residents of the states and jurisdictions in which they are properly registered. Therefore, a response to a request for information may be delayed until appropriate registration is obtained or exemption from registration is determined. Not all of services referenced on this site are available in every state and through every advisor listed.

.