A listener asked:
“How often should I review or rebalance my portfolio in this kind of market?”
It’s a fair question, especially after the rollercoaster markets of the past year. Between steep drops and surprising rebounds, it’s easy to wonder whether your portfolio is due for a check-in.
Let’s talk about rebalancing.
Two Common Rebalancing Approaches
There are two main ways to approach portfolio rebalancing:
1. Time-Based Rebalancing
This is the approach we often recommend: pick a date (typically during your annual review) and rebalance everything back to target allocations. Then, let the portfolio ride for the next year, no matter what markets do.
From a research standpoint, this method holds up well. It’s simple, it removes emotion, and it helps maintain consistent long-term risk exposure.
2. Threshold-Based Rebalancing
In this approach, you monitor your portfolio continuously and set specific triggers. For example, if your goal is to hold 30% in large cap value stocks, and that allocation drifts above 35% or below 25%, you’d rebalance.
Threshold rebalancing can work well – especially for those who monitor markets closely. But it requires more time and effort, and it introduces a risk: behavioral mistakes.
The Real Risk Isn’t Market Swings—It’s Emotional Decisions
One of the biggest benefits of time-based rebalancing is that it takes you out of the market’s emotional swings.
Here’s what often happens: when markets are volatile, people avoid looking at their accounts. That’s normal; no one enjoys seeing a sea of red. But with threshold rebalancing, volatility is exactly when you’d be required to check your balances and place trades.
And that’s when bad decisions happen. A 20% drop can tempt investors to go to cash “just for a bit.” But if the market rebounds (like it did recently) you risk missing the recovery entirely.
Market timing requires being right twice: once when you sell, and again when you buy back in. That’s hard to do—and missing either moment can derail years of progress.
Bottom Line
Both rebalancing methods can work. But unless you enjoy spreadsheets and market alerts, time-based rebalancing offers one big advantage: it helps you stay disciplined and avoid costly mistakes.
Set your rebalancing schedule in advance—whether the market is up, down, sideways, or on fire—and stick to it. That discipline is often the best “strategy” of all.
For more perspective on portfolio strategy and rebalancing, listen to the full podcast episode here.