Investing

Portfolio Rebalancing: When and How to Do It

A portfolio left unrebalanced drifts from its target allocation — becoming either riskier or more conservative than you intended, without any deliberate decisio…

Investing

Portfolio Rebalancing.

The maintenance that keeps your portfolio doing what you designed it to do.

A portfolio left unrebalanced drifts from its target allocation — becoming either riskier or more conservative than you intended, without any deliberate decision to change it. Rebalancing restores design intent automatically.

5%drift in any asset class from its target allocation is a common threshold that triggers a rebalance — restoring risk level and creating a disciplined buy-low, sell-high mechanism

The Situation

Why Portfolios Drift

When stocks outperform bonds, your portfolio's equity allocation grows beyond your target. A portfolio designed to be 70% stocks and 30% bonds can easily reach 80/20 after a strong equity run — increasing your risk exposure beyond what you originally chose. The reverse happens when stocks decline. Drift is automatic and inevitable; rebalancing is the correction.

Rebalancing is not a market timing strategy. It is a risk management discipline that restores the portfolio you designed — regardless of what markets have done.
— Worthune Decision Framework

Your portfolio hasn't been rebalanced in over 12 months
You're unsure whether your current portfolio allocation matches your intended target
You don't have a systematic process for when and how to rebalance

About This FinBook

A 5% drift in any asset class from its target allocation is a common rebalancing trigger. Learn when to rebalance, how to do it tax-efficiently, and what to avoid.

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