The brutal truth about rebalancing: why it feels wrong—and why you need to do it anyway
Rebalancing is a habit that separates pros from amateurs
Truthifi Editors
Published
Feb 21, 2025
5 min
🚨 Before we dig into the psychology—let’s get one thing straight: Rebalancing might be the most overlooked power move in investing.
📐 Rebalancing 101: the habit that separates pros from amateurs
"Rebalancing isn’t about chasing returns. It’s about returning to your plan."
Rebalancing is your discipline in action. It’s how you take back control when markets try to pull you off track. When your portfolio drifts—and it always will—rebalancing is how you get back to target. Rebalancing brings it back in line.
Asset allocation refers to how you divide your investments across major asset classes—like stocks, bonds, and cash. Your allocation reflects your goals, risk tolerance, and time horizon. For example, a 60/40 portfolio means 60% stocks and 40% bonds.
When stocks rally, that 60/40 portfolio might become 70/30. If you’re using an investment rebalancing calculator, you’ll quickly see how far off you’ve drifted from your target mix. Rebalancing restores it to 60/40—by selling some stocks and buying bonds.
This isn’t bookkeeping. It’s strategy. It’s how serious investors avoid emotional drift—and beat the undisciplined ones. It keeps your risk profile intact, reinforces discipline, and ensures your investment plan reflects your intentions—not market momentum.
💼 You use ETFs and mutual funds—do you still need to rebalance?
"Even professionally managed funds can drift. Your job? Manage the whole picture."
Most investors own a mix of financial products—like mutual funds, ETFs, index funds, or managed accounts. Each of these has its own structure, but they all relate to rebalancing in two ways:
Internal rebalancing: Some products (like target-date funds) automatically rebalance within themselves.
External rebalancing: You still need to rebalance between products in your portfolio—especially if you hold different asset types or strategies.
Even if you use professionally managed funds, your overall portfolio still requires periodic rebalancing. Especially if you:
Contribute new money regularly
Withdraw for income or life goals
Own assets in different tax accounts
The takeaway? Rebalancing is your job—even if you use advisors, apps, or autopilot funds. It's how you own your portfolio. Whether it’s done manually or via automatic investment rebalancing, the key is consistency and awareness.
👉 Be honest—how many times have you avoided rebalancing because it just didn’t feel right?
That hesitation? That’s your brain resisting what your plan requires. Rebalancing doesn’t just test your strategy. It tests your emotional wiring.
And that’s why it’s one of the most crucial—and psychologically brutal—moves in long-term investing.
This post unpacks the behavioral science behind rebalancing and gives you tools (including Truthifi features) to make smarter, more consistent decisions.
🧠 Why rebalancing messes with your head (and how to beat it)
"Rebalancing triggers your inner behavioral biases—right when they’re loudest."
Rebalancing isn’t just a mechanical portfolio adjustment—it’s a direct confrontation with some of our deepest psychological tendencies.
Loss aversion makes us fear selling winners. If something’s been working, why touch it?
Regret aversion causes us to avoid moves that might make us feel foolish in hindsight. What if we rebalance and the asset keeps climbing?
Recency bias tricks us into thinking recent performance will continue forever. A strong run in tech or energy starts to feel like a permanent trend.
These biases are powerful because they whisper to us in moments of uncertainty. They show up exactly when we’re least equipped to challenge them—during moments of market emotion, performance extremes, or decision fatigue.
In theory, we know rebalancing helps us manage risk and stick to our strategy. Still, many investors ask: what is rebalancing investments, and why does it feel so uncomfortable?
In real life? It feels like you’re cutting the flowers to water the weeds. That’s the gut punch of rebalancing—and exactly why most investors skip it.
⚠️ The silent danger of not rebalancing your portfolio
"Doing nothing feels safe—but the longer you wait, the harder it becomes to act."
So what happens when we don’t rebalance?
Letting your portfolio drift might feel comfortable—it might even feel smart. After all, why interfere when your winners are winning?
But this “do nothing” strategy has real costs:
You end up with unintentional overweights that magnify volatility.
You drift away from your ideal risk/return profile without noticing.
Your portfolio’s behavior diverges from your expectations—and planning assumptions break down.
You slowly abandon your plan without realizing it.
Here’s the brutal truth: The longer you avoid it, the heavier the lift gets. You start building emotional attachment to those winners. You convince yourself the drift is harmless. And before you know it—you’re no longer investing. You’re just reacting.
It’s a behavioral snowball.
🧭 Think like a strategist: rebalancing is returning to plan
"Think of rebalancing not as selling winners—but as sticking to strategy."
Rebalancing doesn’t have to be painful.
But to make it easier, we need a new mental model—one that reframes the discomfort:
Don’t think of rebalancing as “selling winners.” Think of it as returning to strategy.
The goal isn’t to predict markets. The goal is to control risk and keep your plan on track.
The power isn’t in being right. It’s in being consistent.
This mindset shift turns rebalancing from a punishment into a practice.
The more you do it, the more it reinforces your role as a disciplined investor—not a market chaser.
Think of it as your system for staying intentional—even when the market is trying to throw you off course.
🛠️ These 4 tools make rebalancing way easier (and smarter)
"The best decisions come from clarity—not urgency. Use tools that show you the full picture."
The best way to rebalance consistently? Use tools that make the invisible visible. Whether you're using an investment tracker, or a scoring system like Truthifi, the goal is the same: to stay aligned with your long-term plan.
Truthifi makes rebalancing easier, less emotional, and more actionable. It’s more than investment monitoring—it’s behavioral awareness built into your workflow:
📊 The Dashboard — See at a glance where your allocations have drifted, and whether they align with your plan
⚠️ The Equity Concentration report — Identify where you’ve become unintentionally concentrated
📄 The Statement — Track your portfolio behavior over time
🧠 The Score — Measure your behavioral consistency
With these insights, rebalancing becomes a process you can trust—not a reaction you dread.
You make better decisions because you can see more clearly.
The ability to track investments intelligently is what separates reactive investors from resilient ones.
🧩 Final word: rebalancing isn’t optional—it’s ownership
"Rebalancing isn’t a sign of weakness. It’s a signal of mastery."
Rebalancing is one of those things that feels wrong in the moment—but proves right over time.
It’s emotionally hard. It goes against your instincts. And yet, it’s one of the most powerful ways to protect your plan, manage risk, and practice discipline.
So if you feel resistance—that’s normal.
The key is to build habits and systems that let you act anyway.
Zoom out. Use data over drama. And ask yourself: Are you being strategic—or just scared to act?
And when the time comes?
Rebalance anyway.
📚 Read next from the Truthifi blog
🚨 Before we dig into the psychology—let’s get one thing straight: Rebalancing might be the most overlooked power move in investing.
📐 Rebalancing 101: the habit that separates pros from amateurs
"Rebalancing isn’t about chasing returns. It’s about returning to your plan."
Rebalancing is your discipline in action. It’s how you take back control when markets try to pull you off track. When your portfolio drifts—and it always will—rebalancing is how you get back to target. Rebalancing brings it back in line.
Asset allocation refers to how you divide your investments across major asset classes—like stocks, bonds, and cash. Your allocation reflects your goals, risk tolerance, and time horizon. For example, a 60/40 portfolio means 60% stocks and 40% bonds.
When stocks rally, that 60/40 portfolio might become 70/30. If you’re using an investment rebalancing calculator, you’ll quickly see how far off you’ve drifted from your target mix. Rebalancing restores it to 60/40—by selling some stocks and buying bonds.
This isn’t bookkeeping. It’s strategy. It’s how serious investors avoid emotional drift—and beat the undisciplined ones. It keeps your risk profile intact, reinforces discipline, and ensures your investment plan reflects your intentions—not market momentum.
💼 You use ETFs and mutual funds—do you still need to rebalance?
"Even professionally managed funds can drift. Your job? Manage the whole picture."
Most investors own a mix of financial products—like mutual funds, ETFs, index funds, or managed accounts. Each of these has its own structure, but they all relate to rebalancing in two ways:
Internal rebalancing: Some products (like target-date funds) automatically rebalance within themselves.
External rebalancing: You still need to rebalance between products in your portfolio—especially if you hold different asset types or strategies.
Even if you use professionally managed funds, your overall portfolio still requires periodic rebalancing. Especially if you:
Contribute new money regularly
Withdraw for income or life goals
Own assets in different tax accounts
The takeaway? Rebalancing is your job—even if you use advisors, apps, or autopilot funds. It's how you own your portfolio. Whether it’s done manually or via automatic investment rebalancing, the key is consistency and awareness.
👉 Be honest—how many times have you avoided rebalancing because it just didn’t feel right?
That hesitation? That’s your brain resisting what your plan requires. Rebalancing doesn’t just test your strategy. It tests your emotional wiring.
And that’s why it’s one of the most crucial—and psychologically brutal—moves in long-term investing.
This post unpacks the behavioral science behind rebalancing and gives you tools (including Truthifi features) to make smarter, more consistent decisions.
🧠 Why rebalancing messes with your head (and how to beat it)
"Rebalancing triggers your inner behavioral biases—right when they’re loudest."
Rebalancing isn’t just a mechanical portfolio adjustment—it’s a direct confrontation with some of our deepest psychological tendencies.
Loss aversion makes us fear selling winners. If something’s been working, why touch it?
Regret aversion causes us to avoid moves that might make us feel foolish in hindsight. What if we rebalance and the asset keeps climbing?
Recency bias tricks us into thinking recent performance will continue forever. A strong run in tech or energy starts to feel like a permanent trend.
These biases are powerful because they whisper to us in moments of uncertainty. They show up exactly when we’re least equipped to challenge them—during moments of market emotion, performance extremes, or decision fatigue.
In theory, we know rebalancing helps us manage risk and stick to our strategy. Still, many investors ask: what is rebalancing investments, and why does it feel so uncomfortable?
In real life? It feels like you’re cutting the flowers to water the weeds. That’s the gut punch of rebalancing—and exactly why most investors skip it.
⚠️ The silent danger of not rebalancing your portfolio
"Doing nothing feels safe—but the longer you wait, the harder it becomes to act."
So what happens when we don’t rebalance?
Letting your portfolio drift might feel comfortable—it might even feel smart. After all, why interfere when your winners are winning?
But this “do nothing” strategy has real costs:
You end up with unintentional overweights that magnify volatility.
You drift away from your ideal risk/return profile without noticing.
Your portfolio’s behavior diverges from your expectations—and planning assumptions break down.
You slowly abandon your plan without realizing it.
Here’s the brutal truth: The longer you avoid it, the heavier the lift gets. You start building emotional attachment to those winners. You convince yourself the drift is harmless. And before you know it—you’re no longer investing. You’re just reacting.
It’s a behavioral snowball.
🧭 Think like a strategist: rebalancing is returning to plan
"Think of rebalancing not as selling winners—but as sticking to strategy."
Rebalancing doesn’t have to be painful.
But to make it easier, we need a new mental model—one that reframes the discomfort:
Don’t think of rebalancing as “selling winners.” Think of it as returning to strategy.
The goal isn’t to predict markets. The goal is to control risk and keep your plan on track.
The power isn’t in being right. It’s in being consistent.
This mindset shift turns rebalancing from a punishment into a practice.
The more you do it, the more it reinforces your role as a disciplined investor—not a market chaser.
Think of it as your system for staying intentional—even when the market is trying to throw you off course.
🛠️ These 4 tools make rebalancing way easier (and smarter)
"The best decisions come from clarity—not urgency. Use tools that show you the full picture."
The best way to rebalance consistently? Use tools that make the invisible visible. Whether you're using an investment tracker, or a scoring system like Truthifi, the goal is the same: to stay aligned with your long-term plan.
Truthifi makes rebalancing easier, less emotional, and more actionable. It’s more than investment monitoring—it’s behavioral awareness built into your workflow:
📊 The Dashboard — See at a glance where your allocations have drifted, and whether they align with your plan
⚠️ The Equity Concentration report — Identify where you’ve become unintentionally concentrated
📄 The Statement — Track your portfolio behavior over time
🧠 The Score — Measure your behavioral consistency
With these insights, rebalancing becomes a process you can trust—not a reaction you dread.
You make better decisions because you can see more clearly.
The ability to track investments intelligently is what separates reactive investors from resilient ones.
🧩 Final word: rebalancing isn’t optional—it’s ownership
"Rebalancing isn’t a sign of weakness. It’s a signal of mastery."
Rebalancing is one of those things that feels wrong in the moment—but proves right over time.
It’s emotionally hard. It goes against your instincts. And yet, it’s one of the most powerful ways to protect your plan, manage risk, and practice discipline.
So if you feel resistance—that’s normal.
The key is to build habits and systems that let you act anyway.
Zoom out. Use data over drama. And ask yourself: Are you being strategic—or just scared to act?
And when the time comes?
Rebalance anyway.
📚 Read next from the Truthifi blog
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Always consult with a qualified financial advisor before making investment decisions.
Truthifi™ is the world’s first investment monitoring app. We're for investors who want clarity, advisors who want distinction, and an industry that needs trust.
Truthifi™ is the world’s first investment monitoring app. We're for investors who want clarity, advisors who want distinction, and an industry that needs trust.
Truthifi™ is the world’s first investment monitoring app. We're for investors who want clarity, advisors who want distinction, and an industry that needs trust.