Five Questions to Ask Before Rebalancing a Portfolio

Rebalancing is often framed as purely mechanical — drift past a threshold, trade back to target. That framing is useful for removing emotion from small decisions, but it can also mask decisions that deserve more thought.

Worth asking first

Has anything about the underlying objective actually changed, or only the market price? Is the drift temporary or structural? Would rebalancing trigger a cost — tax, liquidity, or otherwise — that changes the calculus? Is the current weight actually a problem, or just different from the original target? And finally: would you choose this allocation today, starting from cash?

None of these questions argue against rebalancing. They argue for treating it as a decision rather than a reflex, even when the mechanics are systematic.