What No One Tells You About Rebalancing Your Portfolio

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What No One Tells You About Rebalancing Your Portfolio By: Marc Guberti Marc Guberti Marc Guberti is a personal finance writer who hosts Breakthrough Success, a podcast where he teaches listeners how to grow their businesses and achieve personal transformations. Has also written: What Investing Pros Know About Buying After a Sell-Off Warren Buffett’s Advice for Anyone Over 50 Warren Buffett's Lesson on How Much Cash You Should Really Keep in Retirement How Fear of Losing Money Keeps You From Getting Rich Mark Cuban’s Take on Index Funds vs.

Active Investing See full bio Published: Mar 7, 2026 5 min read Money is not a client of any investment adviser featured on this page. The information provided on this page is for educational purposes only and is not intended as investment advice. Money does not offer advisory services.

Getty Images When investing, it's important to adjust your asset allocation so it continues to align with your goals and risk tolerance, and rebalancing can help you stay on track. Rebalancing refers to buying and selling assets in your portfolio to maintain the right allocation. For example, if you're targeting a portfolio of 60% stocks and 40% bonds but the stock market surges and 70% of your portfolio is now in stocks, it’s time to sell some stocks. Must ReadExperts are Bullish on Gold — Here's How to Get InWhy Retirees Are Turning to Gold as a Buffer Against Stock Market LossesWarren Buffett on Market Volatility — and 3 Ways You Can Take Advantage The way you rebalance your portfolio will determine how much you pay in taxes. Doing it incorrectly can result in unnecessary expenses, but there are a few rebalancing rules that can maximize your savings. 1. Don’t base it on emotions Rebalancing should be methodical. Investors who buy and sell due to scary market headlines and sharp corrections risk losing out on long-term growth opportunities and exiting quality positions too early. Having a fixed schedule, such as quarterly or annual portfolio reviews, keeps emotions out of the decision-making process. You can check in with your current financial situation and assess if your portfolio construction serves your long-term goals. Some retirees can cut back on growth-oriented assets and focus on fixed-income investments to minimize volatility and risk. However, the decision shouldn’t be based on how the stock market has performed over the past month. Long-term financial goals and your risk tolerance are the key variables that should influence how you rebalance your portfolio.

Gold Investor Kit Offer: Sign up with American Hartford Gold today and get a free investor kit, plus receive up to $20,000 in free silver on qualifying purchases 2. Prioritize tax-advantaged accounts When rebalancing, make sure you understand what will trigger a taxable event. Rebalancing in tax-advantaged accounts such as 401(k)s and individual retirement accounts (IRA) isn’t taxable, but doing so in a taxable brokerage account can be. If you can — and it aligns with your overall plan — prioritize selling assets in tax-advantaged accounts instead of your brokerage account. When investors live off their portfolios, it often makes sense for them to strategically withdraw from their traditional 401(k) and IRA plans to spread the tax impact over several years. You can avoid higher tax rates by tapping into your brokerage and Roth accounts when appropriate. Withdrawing some money from your traditional retirement plans in between retirement and collecting your first Social Security payout can also help. Free Trade: Check out Robinhood's online trading platform and get the first trade on them 3. Use dividends You don’t have to sell the winners in a taxable brokerage account to diversify your holdings. Investors can opt to receive dividends as cash instead of reinvesting dividends into additional shares. People who follow this strategy can then put the dividend income toward underperforming assets in their portfolio. This strategy lets you rebalance your portfolio without selling your holdings, which may reduce your tax bill. Extra Money: Get up to $1,000 in stock when you fund a new active SoFi invest account 4. Use tax-loss harvesting Tax-loss harvesting is a strategy that entails selling investments at a loss to offset gains elsewhere in your portfolio to potentially lower your tax bill. Tax-loss harvesting is especially popular near the end of the year, when investors will sell losing stocks and buy elsewhere. Just be careful of the wash-sale rule from the IRS which prohibits you from selling an asset for tax-loss harvesting and then immediately buying the same or a substantially identical security within 30 days before or after that sale. Tax-loss harvesting can be complicated, so consider reaching out to a financial advisor or tax expert to help you with your plan. Must ReadExperts are Bullish on Gold — Here's How to Get InWhy Retirees Are Turning to Gold as a Buffer Against Stock Market LossesWarren Buffett on Market Volatility — and 3 Ways You Can Take Advantage