Capital Management

Portfolio Rebalancing

By Walid Mograbi · 2026-05-26 · 1 min read

Rebalancing is restoring your portfolio to its intended asset mix after it drifts over time. The point is not daily trading, but periodic control of risk so your portfolio stays aligned with your original plan.

What rebalancing means

Rebalancing is the process of bringing a portfolio back to its original asset allocation when it has drifted away from the planned mix.

Why this is useful

If one asset class rises faster than others, the portfolio can become riskier than your starting strategy. Rebalancing helps you notice and correct that shift before it changes the portfolio’s behavior.

Core principle: don’t overtrade

The target is not to rebalance every day. The goal is to maintain the portfolio’s intended level of risk and allocation over time.

Practical checklist before rebalancing

• Have assets moved away from your target allocation?
• Is it time for your periodic review?
• Did you estimate fees and tax implications?

Review frequency

Many educational sources suggest reviewing the allocation every six to twelve months. This makes rebalancing routine and reduces reactive decisions.

Fees and taxes first

Rebalancing can generate trading costs and tax effects. When possible, use fresh contributions to reduce the amount you need to sell.

Limits and benefits

This improves discipline and keeps risk closer to your plan. It does not guarantee profit, and it can still create costs or tax impact.