Consider rebalancing whenever your asset allocations stray significantly from your long-term strategy.
Review your investment proportions at least once a year, and consider rebalancing if an allocation is 5% higher or lower than your parameters.
For instance, if you have determined that 60% of your portfolio should be in stocks, and you notice that stocks have risen to 65%, readjust your investments to get back to 60%.
Sometimes, the performance of investments can offset the balance you seek. Sometimes, changes in your circumstances – such as a loss of income or unplanned medical expenses – can alter your investment objectives.
Resist rebalancing in reaction to short-term market volatility. Because of possible fees and possible tax consequences, don’t rebalance too frequently.