Introduction to Portfolio Rebalancing
Portfolio rebalancing is a systematic process to realign asset allocations to their original, desired state. Over time, market movements can cause portfolios to drift from their intended asset mix. Rebalancing involves selling assets that have become overweighted and buying those that are underweight to restore the target allocation. A disciplined rebalancing strategy helps investors control risk and maintain exposure to their chosen asset classes.
Worked Example: These Figures Today
The companies used as examples above, with the current figures behind them. Illustrations of the metric — not a ranking, not a shortlist, and not a recommendation.
| Ticker | Company | Price | Change | Market Cap | MoonshotScore |
|---|---|---|---|---|---|
| VTI | Vanguard Total Stock Market Index Fund | $375.59 | +0.69% | $2.3T | — |
| BND | Vanguard Total Bond Market ETF | $71.27 | +0.10% | $389.9B | — |
| VEA | Vanguard FTSE Developed Markets ETF | $69.33 | +0.41% | $315.3B | — |
Shortlist Context
The model portfolio consists of three ETFs:
* **VTI:** A broad U.S. stock market ETF.
* **BND:** A broad U.S. bond market ETF.
* **VEA:** An ETF providing exposure to developed international equities. These ETFs offer diversified exposure to major asset classes, making them suitable building blocks for a balanced portfolio.
“MoonshotScore rates a US-listed stock 0 to 100 using five sector-relative pillars. Higher means stronger numbers across business quality, safety, valuation, growth and momentum. Eligible common stocks and ADRs only; funds, ETFs, warrants, units, SPACs, preferreds, and notes carry none. It is built for education and deeper due diligence, not financial advice.”
Questions worth resolving before acting on the screen
What is the primary goal of portfolio rebalancing?
To maintain the desired asset allocation and risk profile.
How often should a portfolio be rebalanced?
Rebalancing frequency depends on individual circumstances and market volatility, but annual or semi-annual rebalancing is common.
What are the potential benefits of rebalancing?
Rebalancing can help control risk, maintain diversification, and potentially improve long-term returns by systematically buying low and selling high.
What are the tax implications of rebalancing?
Rebalancing can trigger capital gains taxes when selling appreciated assets. Consider tax-advantaged accounts to minimize these effects.
Can rebalancing be automated?
Yes, some brokerages offer automated rebalancing tools that trigger trades based on predefined thresholds.