How Often Should You Rebalance Your Portfolio? - Ep. 139

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Justin and Jared break down portfolio rebalancing: why it matters, calendar vs. band-based approaches, tax implications, and how oil and gas professionals should think about concentrated equity exposure.

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Takeaways:

• We define rebalancing as returning a portfolio to its original allocation to reduce risk and restore intended exposures.
• We prefer band based rebalancing over strict calendar rules because bands reduce trading and remove emotional timing decisions.
• We implement household level rebalancing and recommend a ten percent band to limit trades and preserve tax efficiency.
• We caution that rebalancing in taxable accounts can create short term gains and higher taxes so we seek to use retirement accounts when possible.
• We note that ongoing contributions and withdrawals provide an automatic rebalancing effect and should be used to favor underweight asset classes.
• We advise oil and gas professionals to treat concentrated employer equity and RSUs as variable income and to plan sales and hedges to manage concentration.
• We emphasize that rebalancing is primarily a risk control process and that net returns after fees taxes and volatility are the ultimate measure of success.

Chapters:

• 00:08 - Introduction to Portfolio Engineering

• 02:07 - Rebalancing a Portfolio — Episode Overview

• 12:21 - When and How to Rebalance: Strategies and Timing

• 17:14 - Rising Equity Glide Path — Increasing Stock Exposure in Retirement

• 22:00 - Tax Considerations for Rebalancing

• 30:08 - Embedded Rebalancing: Accumulation vs. Decumulation

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Resources:

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‍Disclosure: This information is for informational purposes only. Nothing discussed during this video should be interpreted as tax, legal, or investment advice. If you have questions pertaining to your specific situation, please consult the appropriate qualified professional.