Rebalancing

Rebalancing — restoring the portfolio’s drifted weights back to their IPS targets. The honest evidence: never-rebalancing often wins long backtests (stocks outrun bonds) but is worst through bear markets — rebalancing is risk control, not return enhancement. Course default: check quarterly, act only past a 5-percentage-point absolute drift band, and rebalance with new contributions first, sales last (sales cost STT and spreads on the PH side; contributions cost nothing). The quiet superpower: band rules make you a mechanical buyer of whatever just crashed — discipline pre-installed.

First used in: 2.6 · Portfolio construction