How often should I rebalance my portfolio?

The primary goal of rebalancing is to keep your portfolio aligned with your risk profile, while being mindful of transaction costs and taxes. Two common approaches are time-based and threshold-based. Rebalancing at a fixed time (such as annually or semi-annually) is predictable and easy to implement but could trigger unnecessary trades and may not respond quickly to market moves. By rebalancing when allocations drift beyond a set threshold (such as a ±5% change) from target, you are more responsive to market conditions and avoid unnecessary trading, but this approach requires ongoing monitoring. A hybrid approach using both time and threshold allows you to review your portfolio at set intervals but only rebalance if thresholds are breached.

There is no guarantee that asset allocation or diversification will enhance overall returns, outperform a non-diversified portfolio, nor ensure a profit or protect against a loss. Investing involves risk, including possible loss of principal.