Set It and Forget It? Not So Fast. When to Rebalance Your Portfolio

Haven’t read part 3 yet? Understand how investment fees affect your long-term returns.

It’s easy to assume your retirement plan doesn’t need much attention once you’ve picked your investments. But the truth is, your portfolio isn’t a slow cooker. Left unattended, it can drift off course.

Over time, the mix of investments in your Fidelity or TIAA account can change significantly, even if you never touch a thing. This shift, called portfolio drift, happens when certain investments grow faster than others. If your stock funds outperform your bond funds for a few years, your portfolio might suddenly be much riskier than you intended. That’s where rebalancing comes in.

What Is Rebalancing?

Rebalancing is the process of adjusting your investments back to your original target allocation. Let’s say you started with 70% stocks and 30% bonds. A few years of strong stock market growth might leave you with an 80/20 mix, more risk than you signed up for. Rebalancing restores the balance by selling some assets that have grown and buying more of those that haven’t.

Why Rebalancing Matters

If you never rebalance, your portfolio could become more aggressive or more conservative than you realize.

That misalignment can lead to:

• Increased volatility when you're closer to retirement

• Lower returns if you're too conservative too early

• Unintended exposure to risk you're not comfortable with

  
  

Rebalancing helps keep your portfolio in sync with your goals and risk tolerance.

When Should You Rebalance?

Most financial professionals recommend rebalancing:

• Once a year

• When your allocation shifts significantly (by 5–10%)

• After major life events like a new job or preparing for retirement

Target-date funds rebalance automatically, but it’s still worth checking in.

Coming Up Next

In part 5, we’ll look at a question nearly every university employee asks: “Am I saving enough?” We’ll explore contribution strategies and how to make the most of your employer’s match.

Download our free guide for a step-by-step walkthrough of asset allocation:

Investing 101 for University Employees