Beginner's Guide to Fundamental Analysis

Make a smug face to the market — Invest with confidence using Fundamental Analysis!

What is Portfolio Rebalancing?

How to rebalance my portfolio?

  1. Keep track of your portfolio allocation, put it in your notes, or carve it on a rock, that’s up to you. But you need a reference point for you to rebalance your portfolio.
  2. The next thing that you should do is choose a certain period when you’d take a look at your portfolio again to see if the risk/reward percentage and weightage are still well-balanced.
  3. If you see that the balance in your portfolio is disturbed, then it’s time for a rebalance!

How often should I rebalance my portfolio?

  • Your investment goals.
  • Your needs.
  • The assets that make up your portfolio.
  • Your strategy.
  • Your risk tolerance.

Types of portfolio rebalancing:

  1. Time — balancing portfolios at specific intervals based on status revealed through regular monitoring.
  2. Threshold — reallocating asset classes to have a mixed or diverse portfolio to reap maximum profits and control risk.
  3. Risk — rebalancing portfolios if investors realize that risks would increase, choosing to diversify investments to tackle losses wisely.
  4. Constant-mix rebalancing — focusing on the allowable percentage composition of an asset in a portfolio, with bands or corridors, and rebalancing when the weight of anyone holding moves outside of its allowable band.
  5. Constant Proportion Portfolio Insurance (CPPI) — allowing investors to set a floor on the dollar value of their portfolio and structure the asset allocation on it, with the percentage allocated to each asset class depending on a cushion value and a multiplier coefficient.
  6. Smart beta — periodic rebalancing similar to the regular rebalancing that indexes undergo to adjust to changes in stock value and market capitalization, using a rules-based approach to allocate holdings across a selection of stocks based on additional criteria like value or return on capital, adding a layer of systematic analysis to the investment.

Cost and Tax

Pros and Cons


  • Managing risk and returns.
  • Keeping your strategy on track.
  • Weeding out emotions from investment decisions.


  • May sell assets prior to its peak.
  • Requires research and time.
  • Portfolio can be riskier than before if asset rebalancing is wrong.
  • Transaction fees.

Bottom line

  • Portfolio rebalancing is crucial for long-term success in investing.
  • Rebalancing helps investors maximize returns and minimize risk by realigning their portfolio back to its original asset allocation after market movements have caused the weightings to shift.
  • There are different methods of portfolio rebalancing, including time-based, threshold-based, risk-based, constant-mix, constant proportion portfolio insurance, and smart beta
  • Investors should keep in mind their investment goals, needs, constituents of their portfolio, strategy, and risk tolerance when deciding how often to rebalance their portfolio.
  • While rebalancing may incur costs and taxes, it is a good practice to avoid holding on to assets that are performing well for too long.

Do keep an eye out for our posts by subscribing to our channel and social media.

None of the material above or on our website is to be construed as a solicitation, recommendation or offer to buy or sell any security, financial product or instrument. Investors should carefully consider if the security and/or product is suitable for them in view of their entire investment portfolio. All investing involves risks, including the possible loss of money invested, and past performance does not guarantee future performance.

Written By

Become a AXEHEDGE investor today.