How to Review and Rebalance Your Investment Portfolio

Do one thing: If you don’t want to rebalance your own investment portfolio, consider a target date or balanced fund managed by a pro.

Heavily Weighted in Stocks

If you are concerned that the markets are riding a little too high for your liking these days, there’s a move you can make to help feel a bit more settled. If you look at the asset allocation of every age group of investors right now, what you’ll see is that the percentage you are likely holding in stocks – whether you are in your 30s, 40s, 50s, or even 60s – has trended up as stock prices have continued to rise. Rebalancing can fix that. 

Importance of Portfolio Rebalancing

Rebalancing isn’t always fun — at least psychologically. By its very nature, it forces us to sell some of our winners and buy some losers, which doesn’t feel great in the moment. But that’s the way to bring your asset allocation back into line. 

Risk Mitigation

It’s an important strategy, particularly for long-term investors. You want to be in the market for decades, so rebalancing your investment portfolio can help to mitigate the risk of losing a lot of money if (or, let’s be honest, when) one particular investment or sector dives. That way, when a market turn down happens, there will be some pain, not nearly as much as it might be if you didn’t take this action. 

Here’s a guide to reviewing and rebalancing your investment portfolio. 

Questions to Consider When Rebalancing

When Samantha Mockford, CFP, AFC,  a wealth advisor with Citrine Capital in San Francisco, meets with clients to review investment portfolios, she takes them through a series of questions. These queries can also serve as good prompts for you as you consider your own investments. Here’s what she asks: 

1. Diversification. Is your portfolio diversified across different asset classes, market capitalization, and geographies?
   • If it’s not, now is the time to move some assets to diversify. In other words, don’t put all of your eggs in one basket or all of your risk into one market sector.
2. Withdrawal Period. How soon do you need the money?
   • Generally, the longer the period of time until you need it, the more risk you can handle.
3. Account Awareness. How often do you check this account? When it was down, how did you respond?
   • This also helps to inform you on how aggressively you can invest your assets.
4. Average Growth. How do you feel about this account’s average growth over the past several years?
   • If you wish it would grow more, can you emotionally handle more volatility?
5. Asset Classes. Are there any asset classes that have grown a lot, pushing your account out of balance?
   • If the answer is yes, consider asking a fee-only financial planner about selling some overweight investments to buy into some underweight investments. This helps keep your account at a risk level that fits you while also buying low and selling high, Mockford says. It’s important to consult a professional about this because there could be tax implications to selling positions at a gain.
6. Appreciation. Do you have securities that have grown a lot in 2025?
   • If so, and you don’t want to pay taxes on the gains, consider donating them to a charity or a donor-advised fund.
7. Expenses. What are the expenses of your investment holdings? What are the holdings’ expense ratios? Are you charged transaction fees? Does your investment manager take a cut out of every contribution or a portion of the sale proceeds?
   • There may be less expensive options available to you.

Can Someone Else Rebalance for You?

If you aren’t comfortable with a hands-on approach to management and rebalancing, Mockford says:

• Fund Manager. Consider a target-date retirement fund or balanced fund managed by a pro. You’ll find these on the menus of your retirement accounts as well as at pretty much every brokerage firm. 
• Financial Advisor. You can also opt to work with a financial advisor and let them manage your asset allocation.  

How Often Should You Rebalance?

Matthew Hofacre, CFP, founder and senior financial planner at Pay It Forward Financial Planning, says

• Year-End Check-In. The end of the year is a good time to check in to see if a client’s views on investing have changed, among other questions. “I think it’s a great time to review their cash flow and goals because I always want to align a client’s investments with when they anticipate needing the money,” Hofacre says. “Any short-term funding need should be protected from investment risk, whereas long-term funding needs are better suited to be tilted towards stocks.”
• Quarterly. Many financial planning firms, including Hofacre’s, run quarterly rebalancing scenarios for clients because they have tools such as computer software that are efficient at showing when clients may be too far out of balance.  
• Annual. For many DIY investors, Hofacre says an annual rebalance is usually adequate. “Whether you rebalance quarterly, semi-annually, or annually, you are still ensuring that no investment drifts too far from your target,” he says.  “People run into problems when they set up an allocation and don’t make any changes for five years.”  

With reporting by Casandra Andrews