With the disparity between Wall Street and Main Street evident, it’s crucial to know how to invest wisely for your future.

Here are the key takeaways from 2020 regarding investments: the market doesn’t reflect the economy. Don’t go against the Fed—when interest rates are low, investors flock to the market for returns, including Bitcoin. Moreover, stimulus funds given to those already secure can boost market performance.

Back in March, when the pandemic shook the economy and caused stock prices to tumble, who would have guessed we’d see stocks rebound by year’s end? Many experts didn’t foresee that. Yet, the advice circulating on social media to treat your 401(k) cautiously proved invaluable.

REBALANCE YOUR PORTFOLIO AS NEEDED

This rally has been uneven, heavily favoring tech stocks while others lagged behind. As of November, when 467 S&P 500 stocks reported positive months, the rally was deemed “widening.” Depending on your investments, you might have taken on more or less risk than you’re comfortable with. Review your asset allocation and make adjustments if necessary.

“It’s vital to rebalance to align with your financial goals,” says an assistant branch manager at a major investment firm. “With fluctuating stock prices, your asset mix has likely drifted.”

ASSESS YOUR RISK TOLERANCE

Before rebalancing, reassess your risk tolerance. With parts of the economy still struggling and unemployment rising, the timeline for recovery remains uncertain. This situation might have changed your risk appetite. Also, consider that prior to the pandemic, stocks enjoyed a decade-long bull market, leading to potential overexposure to equities.

LISTEN TO THE INVESTMENT PODCAST: Learn How to Enhance Your Investments

There are various ways to approach rebalancing. For most investors, start with your stock, cash, and debt mix. This should reflect your long-term strategy before the pandemic. If your ideal allocation is 70% stocks and 30% cash and bonds, and you’ve strayed from that, it’s time to recalibrate. While it may be daunting to invest more in stocks now given market volatility, it’s crucial.

To ease concerns, consider channeling new contributions into stocks until you reach your desired allocation. Low-cost ETFs, mutual funds, and index funds are excellent options for gaining stock exposure without excessive fees.

EXAMINE YOUR SECTOR EXPOSURE

Rebalancing extends to sector holdings as well. If you were fortunate to invest in Zoom Video Conferencing, for example, despite its recent decline, it has surged significantly over the past year. This could mean your tech exposure is higher than you’re comfortable with, prompting a need to reduce your stake in that sector. For those with the expertise, rebalancing at the stock level is also possible, but can be challenging in today’s volatile environment.

PROCEED GRADUALLY WITH REBALANCING

When rebalancing, avoid drastic changes all at once. Gradual adjustments are preferable during market uncertainty. “When making adjustments, consider altering about 25% at a time,” advises a chief market strategist at a leading financial firm. If your portfolio isn’t aligned after a few weeks, make another 25% adjustment. “Investors often err by thinking it’s an all-or-nothing situation,” he adds. “Professionals approach it iteratively.” Now more than ever, slow and steady wins the race.

STAY FOCUSED WITH YOUR INVESTMENTS

In turbulent times, it’s tempting to frequently check your portfolio, but rebalancing should mirror investment: set it and forget it. This doesn’t mean ignoring your portfolio, but after rebalancing, resist the urge to make further changes for a few months. If you invest via a digital platform, you’re likely to receive alerts when your portfolio requires attention.

Above all, it’s crucial to remain calm and stick to your strategy amidst the noise. Overreacting can lead to losses and unnecessary stress. Don’t let emotions dictate your decisions.