Rebalance and Reassess

It happens to all of us from time to time. A physical ailment could be the culprit, or maybe your mental state is in disarray.

When I’m feeling a bit out of whack, I’ve found most times it’s because I’m out of balance, and the solution is to rebalance and reassess. Whether my pursuits aren’t aligning with my goals, my personal life has conflict, or I’m not getting enough exercise, I know it’s time for a change.

Like personal growth, your investment plan needs to rebalance and reassess when it gets out of whack too. You need to get back to the risk levels you’re most comfortable with. Is your investment plan out of whack? When was the last time you rebalanced and reassessed?

In my new book DIY Stock and Securities Investing, rebalancing and reassessing is one of the three risk management strategies I detail and want you to practice. Just as your mental and/or physical state needs a shakeup from time to time, so does your investment plan.

This risk management strategy is not hard to understand nor is it difficult to implement, but I’ve found it’s often neglected. That negligence could cost you a higher return. Once you’ve created your investment plan, rebalancing and reassessing is the only ongoing management strategy you need to practice but it is crucial to your success. Once a year is sufficient. So, if you haven’t done it in a while, now is the time to do it. You may be surprised at what you find.


Never in recent memory has one asset class outperformed the others by such a large margin. That’s the conclusion I reached after recently rebalancing several portfolios I manage (February 2024).

It’s not that the other asset classes lost money in the last year; They made money too. It’s because large growth clobbered the others by such a wide margin. If left unbalanced, large growth will represent a much larger portion of your diversity’s makeup than you originally intended going forward.

History favors a more even split between value and growth stocks, as well as diversifying by size (large, medium, and small). Because of extreme volatility on the risky side of your risky-to-not-so-risky ratio, it doesn’t take long for it to get out of whack. That’s why it’s important to rebalance at least once a year.

Rebalancing Example

The following example represents the actual returns of a 401(k)-type plan I manage. I changed the initial invested amount to $100,000 for illustration purposes and easier math. No new contributions were made during the investment period. Dividends from ETFs and individual stock holdings were not reinvested. Here’s what the portfolio looked like on January 20, 2023, the portfolio’s last rebalancing date, and again on February 9, 2024, which was this year’s rebalancing date.

Each investment category had positive returns, but large growth clobbered them all with a 52% overall return. My client’s large growth component consisted mostly of VUG, a Vanguard ETF, but was supplemented by individual holdings of MSFT (Microsoft), which earned a whopping 77% return.

Rebalancing this portfolio was easy: Sell off a portion of the large growth holdings and a smidgen of medium/small growth to supplement his value, international, and fixed income holdings. I used a spreadsheet to calculate what a “perfect” rebalanced portfolio would look like for the chosen percentages, based on February 9th prices. You may want to use an investing app, or do the calculations on the back of a junk mail envelope:

My client sold the equivalent of $6,500 of shares in his large growth holdings and around $1,700 in his mid and small-cap growth holdings to lower the totals down to near the “perfect” levels. After a day or two, when the proceeds became available from his liquidated ETF sales, he replenished the coffers of the other components of his diversified portfolio by buying the appropriate number of shares, raising large value, mid and small cap value, international, and fixed income totals to near “perfect” levels.

That’s all there is to it, and you’re done with rebalancing for another year. Unless you want to do some reassessing…


A word of caution. Assuming you have a well-thought-out investment plan, reassessing it every year is neither necessary nor encouraged. Practice patience and stick to your plan.

However, sometimes opportunities present themselves. I’m seeing one right now (February 2024). Federally insured CDs from high-rated banks are currently offering one-year CDs with a 5% plus fixed interest rate. That is a great return in our current interest rate environment that carries very little risk.

My client liquidated his bond fund holdings in his 401(k)-type plan and purchased CDs through his 401(k)-type plan’s open brokerage window, locking in the 5%-plus rates for the next twelve months. That should be a big improvement on the barely 1% he earned last year on the less risky side of his investment plan.

This is one of many ways to manage your investment plan more actively. If you have the time and desire to do your research, more power to you. Just remember, except for rebalancing, history has shown most times it’s best to leave your investment plan alone. We’ll see if my active management moves to CDs on the less risky side holds up as the year progresses.

What’s Your Rebalancing and Reassessing Date?

Don’t make this any harder than it has to be. Pick a date and rebalance and reassess on that date every year no matter what. Pick a time of the year that’s convenient and easy to remember. That way you won’t forget.

If you make a yearly contribution to your investment plan, as many who lack a retirement plan at work or who are self-employed do, that’s a good time to rebalance. By allocating that extra money and rebalancing together, you’re killing two birds with one stone, as the archaic saying goes. I prefer calling it a two-fer. I love a timesaving two-fer.

Or you could rebalance at tax time. As soon you’re done with your taxes for the preceding year, while you still have your accountant hat on, go ahead and rebalance and reassess.

Or you may want to do it during your employer’s open enrollment period, the night of the Summer Solstice, or on International Talk Like a Pirate Day (September 19th). Aarrrr. Time to rebalance and reassess, Matey!

DIY Stock and Securities Investing

Have I rekindled your interest in stock investing? If I have, you’re not alone. People are starting to realize that the stock market, despite all that’s going on in the world, is performing much like it always has, as reflected by my client’s 19% one-year return.

If you don’t have your copy yet, it’s time to check out my new book DIY Stock and Securities Investing. It will teach you how to find your best tax-advantaged account, make smart contributions, and invest intelligently and with purpose. I’m confident you can learn to do it yourself and save even more. You’ll achieve financial independence sooner.

Don’t let the book intimidate you. If you just want to set it and forget it, opt-in for my One-Stop-Shop Investing Plan. You’ll be doing something other than working on your finances in no time, yet still realize above-average returns. Best of all, you may be thinking as you read this, you don’t have to rebalance!

Or, maybe Getting More Involved and being more active in the management of your plan is your thing. Geek out on Modern Portfolio Theory and discover the “why” behind my recommendations.

It doesn’t matter whether you’re a very conservative investor, super-aggressive, or somewhere in between. Whether you’re managing three thousand dollars or 3 million, or you’re just getting started or already retired, you’ll still want to follow my 5 tenets of successful stock investing to ensure optimal results.

Keep the book around for future reference. You’ll appreciate the Detailed Table of Contents, where you can find the information you’re looking for in a hurry.

Purchase the 5×8 250-page paperback version on Amazon®, Barnes and Noble®, or order it from your favorite bookstore if it’s not in stock. Or buy the e-book.

Reset Your Risk

Never have a riskier investment plan next year than you had the year before. You want to maintain the same level of risk or reduce it to a lower amount of risk because of your ever-decreasing time horizon for investment. Yearly rebalancing and reassessing, as well as downshifting your stock-to-bond ratio (or as I like to call it your risky-to-not-so-risky ratio), will ensure you won’t violate this important investing principle.

Rebalancing and reassessing should be done at least yearly, around the same time, and without a lot of fanfare or fuss. Accept it as a necessary yearly financial task that must be done without fail. It will help you reach financial independence sooner.