A practical approach to portfolio rebalancing

Over time, strong performers grow and weaker ones shrink. Without attention, your portfolio can drift far from the allocation you originally chose.

Measure the drift

Compare your current weights with your targets. Many investors use bands, such as five percentage points, to decide when drift is large enough to act on.

Consider the costs

Trading fees, bid-ask spreads, and taxes can make frequent rebalancing expensive. Directing new contributions toward underweight assets is often a lower-cost first step.

Choose a method

Calendar rebalancing

Review on a fixed schedule, such as twice a year, and adjust only if drift exceeds your bands.

Threshold rebalancing

Act whenever an asset class moves outside its band, regardless of the date.

Revisit the plan itself

Sometimes drift reveals that your targets no longer fit your goals. Rebalancing is a good moment to confirm the plan still makes sense.

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