Rebalancing: The Unglamorous Habit That Controls Portfolio Risk
Why target allocations drift over time, and simple approaches to resetting them.
As different assets grow at different rates, a portfolio's actual allocation drifts away from its original target — a strong year for equities can leave a portfolio far more stock-heavy than originally intended.
Rebalancing resets the allocation back to target, which mechanically means trimming winners and adding to laggards — a discipline that runs against natural behavioral instincts.
Common approaches include calendar-based rebalancing (e.g., annually) or threshold-based rebalancing (when an allocation drifts beyond a set percentage), each with different tax and cost implications.
This guide is general education for informational purposes only and does not constitute personalized investment advice from Veridian.