Portfolio Rebalancing: What It Is and When You Should Do It
Rebalancing keeps your portfolio aligned with your risk profile. Here's what it means and a simple framework for when to do it.
Over time, market movements pull your portfolio away from its target asset allocation. Rebalancing is the disciplined practice of bringing it back.
Why rebalancing matters
When equities rally, they grow to occupy a larger share of your portfolio than intended — quietly increasing your risk. Rebalancing trims winners and tops up laggards, enforcing 'buy low, sell high' by design.
When should you rebalance?
Two common approaches work well: calendar-based (review annually) or threshold-based (rebalance when an asset class drifts more than 5% from target). Many investors combine both.
The Dilzer view
We rebalance based on your financial plan, not market noise — keeping costs and taxes in mind so the benefit isn't eroded by churn.
Dilshad Billimoria
Founder & Principal Officer, SEBI RIA
Dilshad Billimoria is the Founder and Principal Officer of Dilzer Consultants, a SEBI-registered investment advisory firm with over two decades of experience in financial planning and wealth management.