Why Rebalancing Your Multi-Asset Portfolio Matters (More Than You Think)
If you’ve got a multi-asset portfolio, you probably know it’s designed to be your safety net. By diversifying your investments across a variety of asset classes like shares and bonds, you mitigate the risk of putting all your eggs in one basket. But over time, that carefully balanced mix can drift. And when it does, it can quietly increase your risk without you even realising it.
Picture this: You’ve built a nicely balanced and diversified portfolio. But following a great run in shares, they quickly become a much bigger chunk of your portfolio than you intended. That’s great when markets are up, but not so much when they’re down. This is where rebalancing comes in.
Rebalancing is the process of adjusting your portfolio back to its intended mix. It keeps your investments aligned with your goals, helps you manage risk, and when done correctly, can even boost your long-term returns.
Here’s why giving your portfolio a little spring clean (aka rebalancing) is more important than you might think:
1. Keep Your Risk In Check
Every portfolio starts with a goal, e.g. a 60/40 split between shares and bonds. But if shares surge, that mix can quickly yet quietly shift to 70/30, meaning you’re taking on more risk than you originally signed up for. Sure, that might mean more growth, but also a greater shock when things go south.
Rebalancing resets you to your true comfort zone. Whether you’re conservative, balanced, or growth-oriented, it brings your portfolio back in line with your true risk tolerance. Think of it like a regular health check for your investments, making sure you’re not unknowingly exposed to bigger swings than you can stomach.
2. Lock in Gains (Without Guessing the Market)
One of the greatest things about rebalancing is that it encourages you to sell high and buy low, without overthinking it.
When one asset class outperforms, you trim it back (locking in those gains) and use the proceeds to buy assets that are temporarily out of favour (and therefore cheaper). Over time, this simple habit can help improve returns without trying to “time” the market.
3. Grow Smarter, Not Just Faster
Regular rebalancing, whether done annually, quarterly, or even daily, can lead to better risk-adjusted returns over the long haul.
Research has shown that a 60/40 portfolio that’s rebalanced consistently can outperform a “set and forget” portfolio, all while keeping volatility in check. The difference compounds over decades, meaning more growth with less stress.
With consistent rebalancing, you’re far more likely to get solid, long-term results. A disciplined approach means less emotional whiplash and steadier progress over time.
4. Stick to the Plan
Markets can be emotional places. Fear and greed often hijack investment decisions, pushing investors to chase trends or panic-sell at the worst possible time.
Rebalancing gently drags you back to your plan, adding discipline to your strategy. It’s a structured way of sticking to your original plan, keeping you focused on long-term goals instead of reacting to short-term noise.
Rebalancing isn’t just housekeeping, it’s a key driver of long-term investment success. It helps you:
- Maintain your preferred risk level
- Reap profits and buy undervalued assets
- Build long-term gains without panic
- Capture opportunities across different market conditions
- Ensure investment decisions are grounded in logic, not emotion
Markets will always throw curveballs. But where you can’t control the markets, you can control how you respond to them. Rebalancing gives you that control, keeping your portfolio aligned with your goals and ready for whatever comes next.
If you’re wondering whether your portfolio needs a tune-up, give BISCosgrove a call. Our team of experienced advisers keep your investments balanced and your strategy on track: no jargon, just clear, trusted advice.
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The material and contents provided in this publication are general and informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.
