Maintaining the target weights in your ETF portfolio is a fundamental principle for effective long-term investing. Here's why:
- Risk and return: Your portfolio is designed with a specific risk profile in mind, and your target allocations are determined to maximize returns for this risk profile. Straying from the target allocations could expose you to higher levels of risk, or lower your portfolio's potential for returns.
- Diversification: The target weights are set to provide a balance between different assets in varying economic conditions. This strategic balance helps in mitigating losses when one or more sectors underperform. A skewed portfolio might increase exposure to one sector or asset class, reducing the benefits of diversification.