How often should I rebalance?

Annual rebalancing is sufficient for most. More frequent rebalancing can mean extra trading and taxes in taxable accounts. Less frequent (every 2 years) also works for some.

Should I rebalance during a crash?

Rebalancing during a crash means buying stocks when they're down—which is often the right move. If your allocation has drifted, rebalancing can force you to 'buy low.' Just don't do it if you can't stomach more stock exposure.

Does rebalancing trigger taxes?

In IRAs and 401(k)s, no. In taxable accounts, selling winners triggers capital gains. Use new contributions to rebalance when possible, or rebalance in tax-advantaged accounts.

How to Rebalance Your Portfolio | Investors Lab

What Is Rebalancing?

Over time, one asset class outperforms and your allocation drifts. Rebalancing means selling winners and buying underperformers to return to your target mix (e.g., 60% stocks, 40% bonds).

Why Rebalance?

Risk control: Stocks may grow to 70% when you wanted 60%. Rebalancing brings risk back in line.
Disciplined selling: You sell high (winners) and buy low (underperformers)—the opposite of emotional investing.
Prevents drift: Without rebalancing, a 60/40 portfolio can become 80/20 after a long bull run in stocks.

When to Rebalance

Annually: Simple and sufficient for most.
When drift exceeds 5%: If your target is 60% stocks and you're at 65%, consider rebalancing.
After major life changes: New job, marriage, approaching retirement—revisit your target and rebalance accordingly.

How to Rebalance

In tax-advantaged accounts (IRA, 401k): No tax impact. Sell overweight assets, buy underweight. Do it without worry.

In taxable accounts: Avoid triggering gains. Use new contributions to buy underweight assets. Or rebalance in an IRA if you have one. Only sell in taxable if necessary, and consider tax-loss harvesting.