Rebalancing the various components of a portfolio is a critical piece to building and managing portfolios. Without periodic rebalancing, investors simply ride the ups and downs of various market cycles. If investors don't lock in any gains through rebalancing, investors may find themselves no further ahead through extended periods as markets can be cyclical, naturally experiencing both periods of growth and contractions.
A set and fixed rebalance schedule is often worth considering building into your ongoing portfolio construction and management. For long-term investors, setting one or two times each year to review your portfolio will simplify and systematize your process. Having specific set times for rebalancing also allows investors to avoid making emotional decisions and prevents you from reacting to short-term headlines.
Because niche sectors and themes may be more volatile, investors with specific allocations -- and more active investors -- may want to review their holdings more regularly to try to take advantage of market volatility and short-term opportunities. It's important to balance the potential short-term advantages of added rebalances against the transaction costs that may be generated from active trading.
