Portfolio Rebalancing: What It Is and How Often to Do It
Over time, some assets in your portfolio grow faster than others, and the weights drift away from your plan. Rebalancing puts them back. Here's how and when to do it.
What it is
Rebalancing means bringing the asset weights in your portfolio back to their targets. Say you decided to hold 60% stocks and 40% bonds. A year later stocks have gone up, and now they make up 70%. That means your portfolio is riskier than you planned.
Example
| Plan | One year later | After rebalancing | |
|---|---|---|---|
| Stocks | 60,000 ₽ (60%) | 84,000 ₽ (70%) | 72,000 ₽ (60%) |
| Bonds | 40,000 ₽ (40%) | 36,000 ₽ (30%) | 48,000 ₽ (40%) |
| Total | 100,000 ₽ | 120,000 ₽ | 120,000 ₽ |
Some of the stocks that went up were sold, and more bonds were bought. This forces you to sell what has grown and buy what has lagged, without emotions.
How often to do it
- On a schedule: every six months or once a year.
- By threshold: when a weight drifts more than 5 percentage points from the plan.
- With new money: instead of selling, buy the lagging asset with new contributions. This means lower fees and taxes.
How to pick your target weights is covered in the article how to build a portfolio and in the lesson risk management and diversification.
Aspiro Invest — a medium-term portfolio: what to hold, when to review it, and where the protective levels are.
- Rebalancing brings weights back to plan.
- Every six to twelve months, or by threshold when weights drift.
- The simplest way is to buy what lags with new contributions.
Frequently Asked Questions
Do I have to rebalance?
No, but without it your portfolio gradually becomes riskier or more conservative than you intended. Rebalancing keeps risk at the level you chose.
Is rebalancing every month too often?
Usually, yes. Frequent trades increase fees and taxes and add almost no benefit. For a beginner, once every six months or once a year is enough.
Do I pay taxes when I rebalance?
If you sell securities at a profit in a regular brokerage account, you may owe tax. That's why many people rebalance with new contributions, without selling.
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