Portfolio Rebalancing Strategies: Complete Guide
Rebalancing keeps your portfolio aligned with target allocations and manages risk.
Why Rebalance?
Over time, different asset returns cause drift:
- Winners become overweight
- Losers become underweight
- Risk profile changes
Rebalancing Methods
Calendar Rebalancing
Rebalance on a fixed schedule:
- Monthly
- Quarterly
- Annually
Pros: Simple, disciplined Cons: May miss opportunities, unnecessary trades
Threshold Rebalancing
Rebalance when allocation drifts beyond a band:
- Example: Target 60% stocks, rebalance if >65% or <55%
Pros: More responsive, fewer trades Cons: Requires monitoring
Hybrid Approach
Check on schedule, act on threshold:
- Review quarterly
- Only trade if drift exceeds threshold
Costs to Consider
- Transaction costs
- Tax implications
- Bid-ask spreads
- Time and effort
BOFFO Rebalancing Tools
- Drift monitoring
- Target allocation tracking
- Rebalancing recommendations
- What-if analysis