To Clients: Portfolio Rebalancing

(August 2008)Show clients that you’re proactive about their investment portfolio by sending them this customizable template letter.

Dear [client name],

When we first developed your investment portfolio, we determined that the following asset mix best reflected your risk tolerance and time horizon.

• Equities: [insert percentage here]
• Fixed income: [insert percentage here]
• Cash: [insert percentage here]

Today, your portfolio looks like this:

• Equities: [insert percentage here]
• Fixed income: [insert percentage here]
• Cash: [insert percentage here]

While equity market gains are obviously a good thing, they have also moved you away from the ideal asset mix and exposed you to more risk. That’s why, every year, it’s necessary to rebalance your portfolio to reflect the original weighting. Doing this helps to protect you from being too concentrated in one area and can prevent a staggering amount of loss in the future.

We only have to look at what happened with the technology boom in the late 1990s. Then, many investors not only had a disproportionate amount of stocks, but the investments often reflected only one type of sector (technology). These investors were reluctant to add new sectors to the equity mix since the returns technology stocks offered were so superior.

More Creating the right asset mix

• Hot Canadian market starting to weaken

• Foreign equity down, but not out

• Bond markets improve thanks to credit crisis

• Commodities on a bumpy, but profitable road

• Cooling real estate industry still a good investment

• Asset allocation can make or break a portfolio

• To Clients: Portfolio rebalancing

• To Clients: Staying invested long-term

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But of course, those returns didn’t last forever. When the bubble burst, some investors had lost more than half their original portfolio — something that could have been avoided had they rebalanced.

Over the next few weeks, I will be calling to set up an appointment when we can discuss your individual situation in greater detail. In the meantime, if you have any questions, don’t hesitate to contact me.

Sincerely,

[Your signature]

[Your name]

(08/04/08)