Annual Portfolio Rebalancing: A Simple Reset for Your Money

If you’ve ever invested money and then just hoped everything was “still fine” a year later, you’re not alone.

Many people invest once, feel proud (as they should), and then avoid checking in because it feels overwhelming.

But it doesn’t have to be.

In fact, rebalancing is the opposite of complicated: it’s a once-a-year reset that keeps your investments aligned with your goals, your risk level, and your life.

Why is it needed?

Because over time, some investments grow faster than others.

That means your portfolio can become riskier, too conservative or too skewed towards one sector without you noticing.

In this guide, you’ll learn what rebalancing is, why it matters, and exactly how to do it.

What does “rebalancing” mean?

Portfolio rebalancing simply means bringing your investments back to the mix you originally chose.

Imagine your portfolio as a recipe.

You decided how much should go into funds, ETFs or high-risk stocks because that specific mix matched your risk appetite.

But time, some investments grew faster than others, and suddenly the recipe changed - without you meaning to.

Rebalancing is checking the pot once a year and adjusting the ingredients so it still matches your plan.

Let’s look at an example:

Let’s say you decided your portfolio should be 60% ETFs and 40% stocks.

After a strong year in the stock market, your stocks grew faster and your portfolio is now 50% shares and 50% ETFs.

That means you’re taking more risk than you planned, without choosing to.

Rebalancing is simply adjusting it back to 60/40, so your portfolio matches your original plan again.

Step-by-Step: How to Rebalance Your Portfolio

You don’t need spreadsheets, predictions, or perfect timing. Just follow these steps once a year - and it doesn’t have to take more than an hour.

Step 1: Check your current allocation

Log into your investment account and look at how your money is split. This is usually shown as percentages (for example, shares vs bonds or funds).

This is simply a snapshot of where your money sits today.

Step 2: Compare it to your target

Think back to the mix you originally chose, that’s your target allocation. If your current percentages look noticeably different, your portfolio has drifted.

This might be okay if your goals, time horizon or risk appetite has changed.

But if not, you need to adjust.

Step 3: Decide what needs adjusting

If one part has grown too large, that’s usually where the adjustment happens. You’re not judging performance,you’re just asking: Does this still match my risk level and goals?

Step 4: Rebalance using new contributions first

If you’re adding new money, direct it toward the parts that are underweight. This is the easiest and often most tax-efficient way to rebalance.

Step 5: Sell only if needed

If new contributions aren’t enough, you may need to sell a small portion of what’s overweight and move it into what’s underweight.

That’s it.

Rebalancing isn’t about being active all year, it’s about making one calm, intentional decision that keeps your investing plan on track.

Common Mistakes to Avoid

Even though rebalancing is simple, it’s easy to make these common mistakes.

Let’s go through them to make sure you avoid them.

1. Making emotional decisions

When markets move fast, it’s easy to act out of fear or excitement.

Rebalancing should never be driven by how the market feels right now. It works best when it’s planned, calm, and boring.

2. Chasing what’s already done well

If an investment has performed strongly, it can start to dominate your portfolio.

Adding even more because it’s “winning” increases risk. Rebalancing means trimming what’s grown too large, not rewarding it.

3. Reacting to headlines

News cycles are loud and constant.

Rebalancing is not a reaction to market news or predictions.

It’s a scheduled check-in, ideally on the same date every year, no matter what the headlines say.

4. Over-adjusting

Small shifts are normal. You don’t need to fix every tiny imbalance.

Often, directing new money toward underweight investments is enough

5. Mistaking rebalancing for market timing

This is one of the biggest misconceptions. Market timing is trying to predict what will go up or down next.

Rebalancing ignores predictions completely.

It’s about returning your portfolio to the risk level you originally chose.

Mark Your Calendar

Rebalancing is the perfect way to close out the year with intention.

Before the new year begins, take a moment to check in on your portfolio.

In Female Invest, we recommend setting a date before the year ends.

You can then use this checklist to go through your investments and make sure you’re ready for 2026.