After three years of a strong bull market, many investors feel great about their portfolios. Stocks have soared, account balances are higher, and confidence is strong.
But here’s the catch: success in the market can quietly tilt your portfolio out of balance. And when that happens, you may be carrying more risk than you realize.
That’s where rebalancing comes in.
What Is Portfolio Rebalancing?
Rebalancing is the process of bringing your investments—stocks, bonds, cash—back in line with your original plan.
For example:
- Let’s say your target allocation is 60% stocks and 40% bonds.
- After years of strong stock gains, you might now sit at 80% stocks and just 20% bonds.
- That means you’re taking on far more risk than you planned.
Rebalancing restores your portfolio to its intended mix—reducing the chance that a market downturn derails your retirement goals.
Think of it like steering a car. You don’t wait until you’re in the ditch to adjust—you make small course corrections to stay on the road.
Why Rebalancing Matters Now
In long bull markets like the one we’re in, it’s tempting to “let winners run.” But unchecked growth in stocks can leave you exposed if markets shift suddenly.
Rebalancing:
- Keeps your risk aligned with your goals
- Helps you buy low and sell high automatically
- Removes emotion from investment decisions
- Keeps your plan working, no matter what markets do next
How Often Should You Rebalance?
There’s no one-size-fits-all answer. At Redwood Advisory Group, we typically recommend:
- Annual rebalancing as a disciplined baseline
- Adjustments after major market moves up or down
- Strategic rebalancing when adding new money, directing funds into underweighted areas
The key is consistency. Having a rules-based process means you’re not reacting emotionally to headlines—you’re following a plan.
The Top 3 Benefits of Rebalancing
- Managing Risk, Not Timing Markets
Rebalancing isn’t about predicting the next move. It’s about keeping your risk in check so you can weather the next downturn with confidence. - Buying Low, Selling High
It sounds simple, but most investors do the opposite. Rebalancing systematically trims what’s grown too much and adds to what’s lagged—turning volatility into opportunity. - Staying Disciplined
Money is emotional. Rebalancing creates a rules-based system so you can avoid decisions driven by fear, greed, or FOMO.
Final Thoughts: A Bull Market Isn’t the Time to Get Comfortable
The past three years have rewarded disciplined investors—but they’ve also quietly increased risk for anyone who hasn’t rebalanced.
A thoughtful rebalancing strategy ensures your portfolio reflects your goals, your time horizon, and your tolerance for risk—not just the latest market highs.
At Redwood Advisory Group, we integrate rebalancing into our Redwood Retirement Framework—Spend, Grow, Secure—so every dollar in your portfolio has a clear purpose, today and in the future.
Because true wealth isn’t about chasing returns—it’s about staying balanced, confident, and prepared.