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How Often Should You Rebalance Your Portfolio?

Periodically rebalancing your portfolio boosts overall return by selling temporarily outperforming assets and reinvesting into underperforming assets. If each asset displays similar long term returns, underperforming assets have higher future expected returns than outperforming assets. As the higher future expected returns are realized, overall portfolio performance is increased. Here is some annual return data for different rebalance periods from an equally weighted portfolio constructed of bonds, domestic stocks, international stocks, commodities, real estate and gold from 12/31/71 through 8/31/16. No rebalancing: 8.62%. Monthly rebalancing: 9.09%. Quarterly rebalancing: 9.36%. Yearly rebalancing: 9.86%. 2-year rebalancing: 9.55%. Annual rebalancing improves performance the most - over 1% more than with no rebalancing at all. ProFolio's Tactical Capital Preservation and Strategic Growth Multi-Asset portfolios rebalance annually.



The information presented here is the opinion of the author and may quickly become outdated and is subject to change without notice. All material presented in this article are compiled from sources believed to be reliable, however accuracy cannot be guaranteed. No person should make an investment decision in reliance on the information presented here.

The information presented here is distributed for education purposes only and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or participate in any particular trading strategy.

Performance data showing past performance results is no guarantee of future returns.

Performance data showing past performance results is no guarantee of future returns.

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