How Often To Rebalance My Portfolio? The Answer Will Surprise You!
Many Advisors Push For Quarterly Rebalancing. But Is This A Good Idea?
Rebalancing your portfolio sounds like a no-brainer—something you should be doing constantly, right? That’s what the financial industry wants you to believe. The truth is, rebalancing too often can actually hurt your returns, generate unnecessary fees, and cause you to sell your winners too soon.
A Vanguard Research report found that for a balanced portfolio, annual rebalancing worked best. Meanwhile, Warren Buffett’s legendary track record suggests that for a stock-heavy portfolio, less rebalancing is better—sometimes much less.
So, how often should you rebalance? Let’s break it down.
Why The Industry Pushes Frequent Rebalancing (And Why You Should Ignore It)
Frequent rebalancing sounds responsible, right? It makes you feel like you’re taking control of your investments. But here’s the truth:
It helps advisors and firms look proactive. They can show clients they’re “doing something,” even if that something isn’t necessary.
It generates fees. More trades = more transaction costs, which benefit brokers, not you.
It covers up mistakes. If an advisor’s investment recommendation flops, constant rebalancing can quietly erase the evidence.
At the end of the day, frequent rebalancing doesn’t always serve your best interests. It serves the industry's.
Balanced Portfolios: Why Less is More
A balanced portfolio is designed so that when one asset class is struggling, others are thriving. Rebalancing works—just not too often.
Here’s why:
Markets move in long-term trends, and selling too early cuts off your winners.
Frequent rebalancing forces you to trim assets that are still climbing.
Consider the S&P 500’s performance in 2024—it returned 25% for the year, but with only four negative months and every quarter finishing positive.
Look at these numbers:
Month Return (%)
December -2.50
November 5.73
October -0.99
September. 2.02
August 2.28
July 1.13
June 3.47
May 4.80
April -4.16
March 3.10
February 5.17
January 1.59
If you had rebalanced monthly, you would have trimmed stocks eight times—often right before another surge in returns.
If you had rebalanced quarterly, you would have cut stocks at the end of Q1’s massive 10% gain, missing the additional 15% upside for the rest of the year.
The sweet spot? Once per year.
It lets trends play out.
It reduces transaction fees.
It lowers portfolio volatility—helping you sleep better at night.
Stocks Are a Different Game—And Warren Buffett Proves It
Not all investments should be treated equally. Stocks, especially high-quality ones, are a different beast.
Warren Buffett’s long-term approach proves this:
Buffett’s portfolio is highly concentrated. 7-8 stocks often make up 85% of Berkshire Hathaway’s holdings.
He rarely sells winners. His Coca-Cola investment? Held since 1988. American Express? Since 1991.
The best companies compound for decades. The world’s top stocks don’t just have one or two good years—they thrive for decades.
If Buffett rebalanced aggressively, Berkshire would not have 20%+ annualized returns. Instead, his approach is simple: Buy great companies and hold them for as long as the businesses keep performing. When the business (not the stock price) stops performing, its time to sell.
One Big Caveat: The Gut Check
So that’s what the data says but let’s add one caveat from our own experience. If any position in your portfolio is so big that the idea of it falling 50% would stress you out, then the position is probably to big.
Got questions about rebalancing your portfolio? Drop them in the comments—we’ll answer the best ones in an upcoming article. 🚀
Disclaimer: This analysis is for informational purposes only and does not constitute financial advice. Investors should conduct their own due diligence and consult with a financial advisor before making investment decisions.