The volatility and uncertainty in the markets for the last 18 months have been unfathomable. Some investors rushed to sell equities with the false belief of the sky falling. Crypto investors cashed in on the prevailing bull run.

The market has been a rollercoaster for different sectors. Investment portfolios are now in disarray as investors frantically hunt for safer stocks and assets to invest in. Sadly, most people are now forgetting the conventional wisdom of rebalancing the portfolio.

Portfolio Rebalancing 101

The disruptions in the market may have caused significant shifts in your asset allocation. Investment diversification is an excellent way to hedge your assets. Portfolio rebalancing involves selling or buying your asset classes to set them back to the desired risk level.

You sell the better-performing assets and buy the underperforming assets. This intervention restores the original investment allocation, placing your risk exposure under control.

5 Factors to Consider During Your Portfolio Rebalancing

It may require a delicate balance to get the multiple asset classes in the correct target allocations. Here are five tips to guide you in rebalancing your investment portfolio.

Determine Your Target Asset Allocation

Your retirement investment plan may hold different assets, including stocks, cryptocurrencies, and bonds. You may need to determine the right split and thresholds for the various investment classes.

For example, with a 50/50 dual-class investment of ETF stocks and bonds, you can set a minimum of 45% and a maximum of 55% to warrant portfolio rebalancing.

Figure Out Your Rebalancing Parameters

You may need to determine how much intervention you need to make to settle the imbalance. Holding to a weakening asset can do more harm than good. Figure out the cost of the rebalancing. Foreign investments may warrant an international money transfer that can add to the fees incurred.

Be Mindful of Your Tax Obligations

Rebalancing your portfolio may necessitate the selling of several asset classes, with the money earned being taxable. Additionally, you may have to incur fees relating to ask and bid prices. The costs and tax owed can quickly add up, especially if the transactions are large.

You can avoid triggering the tax bill by investing in a tax-advantaged account. Additionally, you can consider cash-flow redistribution by injecting new cash to prop up underperforming assets. It is an alternative to selling your assets which may attract taxable capital gains.

Pick the Right Interval

A common dilemma amongst most investors is how to determine when to carry out the portfolio rebalancing. You may need to pick important dates such as annual reviews to plan your review. Shorter time frames such as quarterly results can be volatile periods which you should avoid.

Consider Automating the Process

You may eliminate the stress of having to review your asset portfolio by taking advantage of automation periodically.  Most investment management firms or platforms have sophisticated software with an auto-rebalancing feature on the accounts. The computerized system can periodically rebalance your asset classes depending on the percentage allocation.



Portfolio rebalancing is a vital process for any savvy investor. It can help minimize your risk exposure while opening up new investment opportunities. Use the tips above to attain the right balance for your investment and secure your future.

5 Things to Remember When Rebalancing Your Portfolio

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