A Stock Exchange organized market for the sale and purchase of securities such as shares, stocks, and bonds. The stock exchange has two important functions.
As a ready market for securities, it ensures their liquidity and thus encourages people to channel savings into corporate investment. As a pricing mechanism, it allocates capital among firms by determining prices that reflect the true investment value of a company’s stock. (Ideally, this price represents the present value of the stream of expected income per share.)
AL-Yoser Investment L.L.C maintains the stock Market investment strategy to manage the Clients portfolio. One of the requirements to sustain the current asset allocation strategy is to rebalance it or redo its allocation now and then. Rebalancing a portfolio is very important because the market performance increases or decreases the assets’ value in some investments with time. For example, if an asset in the portfolio increased in value compared to another asset, it would dominate the portfolio’s performance and vice versa.
Some investors get rebalance their stock investments every year through AL-Yoser Investment L.L.C but experience shows that there is no specific schedule for rebalancing to follow. In general, the longer time an investor gives the investment strategy to achieve its goals, the less there is a need for rebalancing the stock investment portfolio. One of the determinants of the need to rebalance the stock investment portfolio is when the dominant and strongest asset’s percentage in the stock market:
When the investor decides it’s the right time to invest in the Stock Market, there are several ways to do so but the investor can prefer one over the other. To rebalance the stock market investment portfolio, the investor can:
● Sell a part of the invested asset with increased value and then reinvest the profits in another asset that is not high yet.
● Change how newly invested money is added to the portfolio by placing it in other impaired assets until the investor finds the best allocation.
● Increase the capital of the investment portfolio and place the increase to be fully invested in impaired assets.
