The Art of Portfolio Rebalancing

June 17, 2024

Amidst your busy schedules and high-stress responsibilities, it’s crucial to prioritize your financial health. Portfolio rebalancing is the process of realigning the weightings of assets in your portfolio to maintain your desired level of risk and return. It ensures your investments align with your long-term financial goals, helping maintain a balanced portfolio and reduce risk over time.

Why Rebalancing Matters

Market fluctuations can cause your investment portfolio to drift from its original allocation. For instance, if stocks perform well, they may constitute a larger portion of your portfolio than initially intended, increasing exposure to market volatility. Rebalancing realigns your portfolio to its target allocation, helping to manage risks and potentially enhancing returns. While rebalancing, it’s important to consider potential tax implications, as selling assets can trigger taxable events.

Steps to Rebalance Your Portfolio

1. Assess Your Current Portfolio:

  • Conduct a thorough review of all your investment accounts, including IRAs, 401(k)s, and brokerage accounts. This holistic view will provide a comprehensive understanding of your asset distribution.
  • Utilize Tools: Use online portfolio tracking tools or financial software to get a detailed overview of your asset allocation.

2. Set Your Target Allocation:

  • Utilize modern portfolio theory to determine the ideal asset mix based on your risk tolerance, financial goals, and investment horizon. This diversified approach can include a combination of stocks, bonds, and other asset classes.

3. Identify Deviations:

  • Compare your current allocation with the target allocation to identify over- and under-weighted asset classes. This can highlight areas requiring adjustment.

4. Make Adjustments:

  • Implement strategies to bring your portfolio back in line, such as selling overweight investments and purchasing underweight ones. Ensure these adjustments align with your overall financial plan.

Special Considerations for Healthcare Professionals

Young healthcare workers often face unique financial challenges. Here are tailored strategies to help manage your portfolio:

  • Utilize automated financial tools and consider setting up regular consultations with a financial advisor to stay on top of your investments. For instance, a doctor with irregular income from on-call duties might set aside portions of high-income months to cover lower-income periods.
  • Balance aggressive debt repayment with investment growth by prioritizing high-interest debt while contributing to retirement accounts.

Addressing Significant Holdings

Significant individual holdings, like stocks in specific companies, can impact your portfolio balance. For example, if you have a large position in a company like Nvidia, it could skew your allocation toward a single asset class. Imagine Dr. Smith, a (fictional) dentist, has a significant holding in healthcare stocks. To maintain balance, she needs to adjust other holdings to avoid overexposure to the healthcare sector. Thus, she may reduce her ownership of healthcare stocks in other portfolios to offset a position she may want/need to hold in a particular company.

Choosing the Right Investments

Diversified investment options like Indexed ETFs can provide a robust foundation for your portfolio. Understanding investment correlations and choosing funds that align with your financial goals is key. While we would love to provide some example ETF’s, we cannot due to regulatory concerns. However, there are popular sources online which allow you to find suitable (low cost) ETFs in nearly any asset class.

The Importance of Regular Reviews and Adjustments

Regularly reviewing and adjusting your portfolio is essential to stay on track with your financial goals. Consider evaluating your portfolio at least annually, or when significant life events occur, such as marriage, the birth of a child, or purchasing a home, ensuring your investments remain aligned with your objectives.

Seeking Professional Help

Consulting a professional financial advisor can streamline your investment strategy and decision-making process. Look for advisors with credentials such as CFP® or CFA, and verify their credentials through professional organizations. A Certified Financial Planner (CFP®) can provide personalized advice tailored to your unique circumstances, helping you navigate complex financial landscapes.


  • Regularly rebalance your portfolio to stay aligned with your financial goals.
  • Consider potential tax implications when making adjustments.
  • Seek professional advice for personalized financial planning.

Maintaining a balanced portfolio through regular rebalancing is essential for long-term financial health. Regular reviews and adjustments, combined with professional advice, can help ensure a prosperous financial future.

Live free of financial stress.