If you have watched your large-cap tech allocation balloon over the past few years, you are not alone. AI-related stocks have had a remarkable run, and for many investors, what started as a deliberate portfolio weight has quietly grown into something much larger. The question I keep hearing is: how do I bring this back in line without feeling like I am trying to time the market?
It is a fair concern, and the short answer is that rebalancing back to your original target allocation is not market timing. But there is some nuance worth working through.
High Valuations Are a Real Concern
First, let me acknowledge something: the concern is valid. If you look at historical valuation metrics or common economic indicators, markets are elevated right now. That is a reasonable thing to notice. The challenge is that markets can stay elevated for a long time. Recognizing that valuations are high does not give you a reliable signal about when a correction will happen, or whether you should act before it does.
So while the discomfort makes sense, it should not be the thing driving your decision. What should drive it is your allocation.
The Real Issue Is Drift, Not Timing
When a position grows from 25% to 42% of your portfolio, your risk profile has changed. You did not necessarily make an active decision to take on more concentration risk in large-cap tech. It happened because you did not rebalance along the way. That is portfolio drift, and it is exactly the reason regular rebalancing exists.
Here is the key distinction: you are not making a call on where the market is going. You are returning to an allocation you already decided was right for you. That is a fundamentally different act than market timing. Market timing is saying, “I think tech is going to fall, so I am going to reduce my exposure.” Rebalancing is saying, “I agreed that 25% was the right weight for this sleeve, and now it is 42%, so I need to bring it back.”
If you had been rebalancing annually, you would have trimmed this position each year as it grew. The fact that you are doing it now, all at once, can make it feel more dramatic. But the logic is the same.
Start With Your Allocation, Not the Market
Before you do anything, go back to basics. Ask yourself: does 25% in large-cap tech still make sense for my overall portfolio? If the answer is yes, then you have your target. Go rebalance to it.
I think about portfolio allocations like turning a cruise ship, not a jet ski. Big shifts in your allocation weights should require a strong economic thesis and a deliberate decision. You do not move from 25% to 40% in large-cap growth on a whim, and you should not move back to 25% simply because you are nervous. You move because you have a clear view of what your portfolio should look like, and right now the numbers do not match that view.
The Tax Question You Cannot Ignore
This is where the conversation gets more complicated, especially at higher portfolio values. On a $6 million portfolio, bringing large-cap tech from 42% down to 25% means selling roughly $900,000 in appreciated holdings. If those assets are sitting in a taxable account, which is likely at that portfolio size, that is a significant tax event.
Before you execute the rebalance, you need to ask whether it makes sense to do this all at once and absorb the tax hit now, spread the rebalancing over time to manage the tax impact across multiple years, or use any tax-deferred accounts you have to offset some of the growth exposure and reduce what needs to be sold in taxable accounts.
There is no universal right answer here. It depends on your tax situation, your timeline, and how uncomfortable the current concentration actually makes you. What I would say is that the tax question should inform how you rebalance, not whether you rebalance.
You Have Permission to Do This
A lot of long-term investors hesitate to rebalance at a market high because it feels like they are betraying their own philosophy. They have committed to not reacting to headlines, not jumping in and out, not second-guessing the market. Trimming a position when it has run up feels like it violates that commitment.
It does not. Rebalancing is part of a disciplined, long-term investment process. It is not a reaction to fear or headlines. It is a return to a plan you already made when conditions were calmer and your thinking was clear. That is exactly the kind of decision a long-term investor should be making.
If your original allocation still makes sense and your portfolio has drifted significantly away from it, you are not timing the market by correcting it. You are doing what you said you would do.
This post is adapted from a recent episode of the Scholar Wealth Podcast. For more perspective on portfolio rebalancing and managing concentration risk, listen to the full podcast episode here.