Rebalancing is one of those investing topics that sounds far more complicated than it actually is.
Some investors rebalance obsessively.
Others never rebalance at all.
Most aren’t even sure why they should be doing it in the first place.
So let’s clear the noise and answer the real question:
How often should you rebalance your portfolio—without turning investing into a second job?
First, What Rebalancing Actually Means (In Plain English)
Rebalancing simply means bringing your portfolio back to its original target allocation.
Example:
- You start with 80% stocks, 20% bonds
- Stocks perform well, now it’s 88% stocks, 12% bonds
- Rebalancing means trimming stocks and adding bonds to return to 80/20
That’s it.
No market timing. No predictions. No crystal ball.
Just discipline.
Why Rebalancing Matters (Even If You’d Rather Ignore It)
Left alone, portfolios drift. And they usually drift toward more risk, not less.
Rebalancing helps you:
- Control risk over time
- Lock in gains from outperforming assets
- Avoid unknowingly becoming more aggressive than intended
In other words, it keeps your portfolio aligned with who you are as an investor, not just what the market happens to reward this year.
The Big Myth: “More Rebalancing Is Better”
This is where people overcomplicate things.
Rebalancing too often:
- Increases transaction costs
- Creates unnecessary taxes (in taxable accounts)
- Encourages emotional tinkering
Rebalancing isn’t about precision.
It’s about consistency.
The Simple, Proven Answer
For most long-term investors, there are two solid approaches.
1️⃣ Time-Based Rebalancing (The Easiest)
This means rebalancing on a fixed schedule.
Most common options:
- Once per year
- Once every 6 months
For the vast majority of investors, once a year is enough.
It’s simple.
It’s predictable.
And it removes emotion from the process.
If you want investing to stay boring—in a good way—this is your method.
2️⃣ Threshold-Based Rebalancing (Slightly More Involved)
Instead of a calendar, you rebalance when allocations drift beyond a set range.
Example:
- Target allocation: 80% stocks / 20% bonds
- Rebalance if either moves more than ±5%
This method is:
- More responsive
- Slightly more complex
- Best for investors who enjoy monitoring their portfolio
If that sounds like work rather than peace of mind, stick to annual rebalancing.
How Often Is Too Often?
If you’re rebalancing:
- Every month
- Every time markets move
- Because you’re “feeling uneasy”
You’re not rebalancing.
You’re reacting.
And reaction is rarely rewarded in investing.
Does Portfolio Size Change the Answer?
Not really.
Whether your portfolio is:
- $5,000
- $50,000
- $500,000
The principle stays the same.
What matters more is:
- Asset allocation
- Account type (taxable vs tax-advantaged)
- Your behavior during market swings
Rebalancing is a behavioral tool, not a performance hack.
ETFs Make Rebalancing Easier (And Cleaner)
If your portfolio is built around ETFs:
- Fewer positions
- Clear asset roles
- Easier adjustments
This is one of the reasons ETFs work so well for long-term Portfolio Building and disciplined ETF Investing.
Less friction means fewer mistakes.
When You Might Rebalance Less Often
You might rebalance less frequently if:
- You’re still accumulating and contributing regularly
- New contributions naturally pull your allocation back in line
- Your portfolio is very simple (1–2 ETFs)
In many cases, new money does part of the rebalancing for you.
A Simple Rule You Can Actually Follow
If you want one rule and never think about this again, here it is:
Rebalance once a year, on the same date, unless your allocation drifts significantly.
That’s it.
No overthinking required.
Final Thoughts
Rebalancing isn’t about maximizing returns.
It’s about managing risk and staying invested.
The biggest danger isn’t rebalancing too little.
It’s turning rebalancing into an excuse to constantly interfere.
Build a solid allocation.
Check it once a year.
Then get back to living your life.
That’s how long-term investing is supposed to work.
This article is for educational purposes only and does not constitute financial advice.