Portfolio Rebalancing: Simple Rules for Investors
Portfolio rebalancing explained: what it is, why it matters, and simple rules investors use to rebalance without over-trading.
What is rebalancing?
Rebalancing means bringing your portfolio back toward your target allocation after markets move. It can reduce risk and enforce discipline.
Simple approaches
- Time-based (e.g., quarterly/yearly)
- Threshold-based (e.g., rebalance if allocation drifts by 5%)
- Use new contributions to rebalance
Reason: rebalance is behavior control
Rebalancing can force “buy low, sell high” behavior and prevent concentration risk from creeping up.
Build a diversified plan
Start with allocation and risk tolerance, then invest consistently.
FAQs
Does rebalancing increase returns?▼
Not guaranteed. It primarily controls risk and keeps your plan intact.
How often should I rebalance?▼
Many investors rebalance once or twice per year, or when allocations drift meaningfully.
Related
Intrinsic Investor is for education and research only. Not financial advice.