investment 2025-01-12
Portfolio Rebalancing: When and How
Learn when to rebalance your portfolio and the best methods.
Rebalancing maintains your target asset allocation over time.
Why Rebalance?
As investments grow at different rates, your allocation drifts from targets:
- 60/40 stocks/bonds might become 70/30
- Risk profile changes unintentionally
- Rebalancing restores your plan
Rebalancing Strategies
Time-based
- Quarterly, semi-annually, or annually
- Simple and consistent
Threshold-based
- Rebalance when allocation drifts 5%+
- More responsive to market moves
Hybrid
- Check quarterly, act on 5% threshold
- Best of both approaches
Tax Considerations
- Use new contributions to rebalance
- Rebalance in tax-advantaged accounts first
- Consider tax-loss harvesting