Skip to site content
The Show

A Different Take on Rebalancing

So much is made about this tool of asset management, but how much does the average investor actually know?

As a brief overview, rebalancing is getting your investment allocation to the appropriate target.  For example, if your portfolio is comprised of 60% in risk assets (i.e. stocks) and 40% in conservative assets (i.e. bonds) and one piece of that moves differently and throws the balance off, rebalancing helps to get you back to your original allocation.

In the simplest form, rebalancing buys the assets that have gone below the allocation threshold you would like to be at and sells the assets that have gone over. And you rebalance so that you can maintain the appropriate level of risk in your portfolio and to help stay on track to reach long-term financial goals.

But what does the research say about rebalancing? And what is the common sense approach when it comes to this tool? Tune in to this week’s episode to hear us dive into the nuts and bolts of rebalancing and how you can use it in your financial life.

Here’s What You’ll Find Out in this Episode:

  • The side-effects of rebalancing that investors should be aware of
    • It can be expensive (cost and taxes)
    • The time and labor involved
  • How much value is added to a portfolio from rebalancing according to Vanguard
  • The industry standard for rebalancing (hint: there is no standard anymore!)
    • Our philosophy is that a proper allocation need to encompass all aspects of your financial plan: risk profile, goals, age, and unique situations or needs.
  • A brief discussion about the term “catawampus”.
  • Academically, the 3 benefits of rebalancing:
    • 1. Naturally creates a mechanism by which you buy low and sell high
    • 2. Generally speaking, rebalancing allows you to keep your risk in check
    • 3. Allows you to tax-manage your portfolio
  • The primary goals/motivation for rebalancing:
    • 1. Not to be poor: Risk-averse and don’t want to run out of money
    • 2. I want to be rich: Wants to grow
  • Explore the goals-based approach to rebalancing for the young investor vs the older investor and a discussion of what this looks like in real life.
  • The nitty gritty of rebalancing: when we do it and how often
    • We look at client allocations every quarter and we look to rebalance 2x a year, but that doesn’t mean we rebalance every portfolio twice a year.
    • We make sure client allocations reflect goals and if the threshold isn’t large enough, we won’t make the trade.
    • To make sure your portfolio is structured appropriately for your circumstances and the broader economic environment, we look beyond your macro-level split level of stocks and bonds, and we look inside those asset classes and may rebalance inside these spectrums.
  • The value of tax diversification of your portfolio
    • Not all investment vehicles behave the same.
    • Ideal scenario is that as you are building wealth that you build up assets in three separate tax buckets (tax-deferred, tax-free, and taxable) so that you can minimize taxes now or in the future, and to provide flexibility when taking withdrawals later.

Resources Mentioned in this Episode

Enjoy the Show?

Where You Can Watch and Listen:

Subscribe on these platforms or wherever you listen to podcasts for new episodes every Friday, live streams every Tuesday at 10am CT, and new highlight clips throughout the week.

Related Content

Free Resources

Financial Order of Operations®: Maximize Your Army of Dollar Bills!

Here are the 9 steps you’ve been waiting for Building wealth is simple when you know what to do and…

View Resource

Wealth Multiplier By Age

How much to save every month to become a millionaire.

View Resource

How Much Should You Save?

How much of your income can you replace in retirement? You can replace different portions of your income in retirement…

View Resource


I Have a Lot of Money, but I Don’t Feel Wealthy!

, ,

Read More

Is a High Yield Savings Account Still the Best Place to Keep an Emergency Fund?

, ,

Read More

Are We Financial Misers for Investing 60% of Income in Your Mid-20s?

, ,

Read More

Financial FAQs

Courses & Tools

How about more sense and more money?

Check for blindspots and shift into the financial fast-lane. Join a community of like minded Financial Mutants as we accelerate our wealth building process and have fun while doing it.

Millionaire Mission (Brian’s Book)

Buy Now

Know Your Number Course

Buy Now

The Money Guy Net Worth Tool

Buy Now

Recent Episodes

It's like finding some change in the couch cushions.

Watch or listen every week to learn and apply financial strategies to grow your wealth and live your best life.

REACT WorstHousingAdvice B

Financial Advisors React to the Worst Housing Advice on TikTok

Watch Now
401k Sucks

What Should I Do If My 401(k) Sucks?

Watch Now
Financial Planning

Financial Planning 101 (By Age) – The Complete Guide to Financial Success

Watch Now