What's happened
As markets fluctuate, investors are advised to review and adjust their portfolios. Rebalancing involves selling appreciated assets and buying lagging ones to maintain risk levels. Experts recommend focusing on overall asset mix, tax-efficient adjustments, and considering market shifts like international exposure and sector performance.
What's behind the headline?
Rebalancing remains a crucial discipline for investors in 2025, despite its limited impact on returns. It enforces risk management by preventing portfolios from becoming overly concentrated in high-performing assets. The recent market environment, with international stocks leading and sector imbalances like growth versus value, underscores the need for strategic adjustments. Tax considerations, such as harvesting losses in bond funds or reallocating within IRAs and 401(k)s, are vital for efficiency. The advice to focus on overall asset mix rather than individual accounts aligns with best practices, ensuring investors maintain their intended risk and return profiles amid ongoing market shifts. As market conditions evolve, rebalancing will likely become more frequent, especially with the increased prominence of international exposure and alternative assets like gold and bitcoin.
What the papers say
The Independent highlights that rebalancing doesn't necessarily improve returns but is essential for risk control, especially when portfolios drift heavily into stocks or bonds. AP News echoes this, emphasizing the importance of maintaining overall asset balance and tax-efficient adjustments, noting that recent market gains have made rebalancing more challenging due to widespread asset appreciation. Both sources agree on the importance of strategic, tax-aware rebalancing, but The Independent stresses the discipline aspect, while AP News discusses practical considerations like loss harvesting and RMDs. The differing perspectives underscore that, while the core principle remains the same, the approach must adapt to current market conditions and individual tax situations.
How we got here
Market volatility in 2025 has led investors to reconsider their asset allocations. Historically, portfolios drift from their target mixes due to market gains or declines. Rebalancing helps maintain desired risk profiles and can be more important in a high-growth environment, especially with shifts in international and sector performance. Experts emphasize the importance of strategic adjustments within tax-advantaged accounts and using market opportunities like loss harvesting.
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