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How to approach rebalancing your portfolio this year

Portfolio rebalancing may not be a good idea this year. You may want to avoid it altogether.

I’m referring to the process of bringing each asset’s portfolio weight back into line with its assigned weight. That involves selling marginal portions of assets that have performed better than average and buying additional shares of assets that have lagged. Though you can rebalance at whatever frequency you desire, investors most commonly do so in December.

Rebalancing seems like an utterly obvious and unobjectionable thing to do. After all, if you didn’t ever rebalance, then over time your best-performing asset would grow as a share of your portfolio and eventually come to dominate it. In that event, your portfolio’s risk would increase far beyond what you desire.

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