When should I rebalance?

Financial experts suggest that you consider rebalancing in the following ways:

Periodically.

Different classes of investments will probably grow at different rates. As a result, your asset allocation may drift out of balance over time, and you'll need to consider rebalancing your investment holdings.

Many investment experts recommend that you examine your asset allocation at least once a year to determine if you need to rebalance. If you are close to your target allocation, you may not need to adjust your portfolio.

Another strategy for periodic rebalancing is to monitor your portfolio and rebalance when one asset class has risen or fallen roughly five to seven percent in value. However, experts also advise against making major shifts in your portfolio in response to fluctuating markets.

As your goals change.

As your financial goals change throughout your life, you'll need to revisit your asset allocation to ensure that it is aligned with your goals.

As you approach your goals.

In general, the closer you are to your goals, the more conservative your asset allocation strategy should be.

Whenever you rebalance, keep in mind that any changes to your portfolio may involve brokerage or mutual fund fees and may have tax consequences. As a result, you may not want to execute trades to adjust for small deviations from your target allocation.