Rebalancing brings your portfolio weights back to target after markets move. If equities rally from 60% to 72% of the portfolio, you’ve accidentally become more aggressive.
Why bother?
- Keeps risk aligned with the plan
- Forces a mild “sell high / buy low” discipline
- Stops winners from quietly dominating
Two common methods
| Method | How it works | Pros |
|---|---|---|
| Calendar | Review every 6–12 months | Simple |
| Threshold | Rebalance when a sleeve drifts ±5% | Reacts to big moves |
Many investors combine both: check yearly, or sooner if drift is large.
Prefer cash-flow rebalancing
Instead of selling:
- Direct new contributions into underweight sleeves.
- Only sell if drift is large or you’re in a tax-advantaged wrapper where sells are cheap.
Across multiple brokers, decide which account receives the next deposit so the global mix improves.
Example
Target: 70% equity / 30% bonds. After a bull run: 78% / 22%.
- Put the next 3–6 months of contributions into bonds (or bond ETFs)
- Or shift 8 percentage points back if using a taxable sale is acceptable
What not to do
- Rebalance weekly (noise + costs)
- Rebalance into a hot tip instead of the target
- Ignore cash piles sitting in other apps
Key takeaways
- Rebalancing maintains risk, not “maximises return every quarter”.
- Use new money first; sell second.
- Measure weights on the whole portfolio.
Educational only — not personalised investment advice.