Managing your investment portfolio is a lot like practicing holistic medicine. Achieving proper balance means understanding that the whole body is made up of interdependent parts. If one part is not functioning well, all the other parts are impacted because it’s an ecosystem. For example, if you’ve been plagued by migraine headaches, a holistic physician won’t just give you medicine; rather, she will look at all the potential factors that may be causing your headaches, such as sleep habits or stress.

In the investment ecosystem, rebalancing your portfolio is an ongoing process for investors – one that requires the right experts and tools to make your portfolio perform at its optimal level.

What is rebalancing?

Rebalancing is the process of realigning the allocation of assets in a portfolio to reflect an individual’s risk tolerance level under current market conditions. Four classes of assets – stocks or equities, fixed income or bonds, money market or cash equivalents, and real estate of other tangible assets – are what is used to build a portfolio. How well you diversify your assets is a key factor in whether or not you reach your financial goals.

Who should rebalance?

Even if you have a very hands-off approach to your investments, your portfolio needs to rebalanced. In some cases, you won’t need to worry about it, such as if your investments are held within an automatically-managed account or one that automatically rebalances itself. Otherwise, you should rebalance your portfolio on a regular basis.

How often should I rebalance?

Just as everyone has a different comfort level with risk, identifying the frequency with which you rebalance your investments is also a personal choice.

Tying it to a milestone annual date such as a birthday or tax season can help you more easily remember to rebalance consistently. Keep in mind though, the market changes and new opportunities arise more frequently than once/year. A more tactical asset allocation strategy can be highly advantageous. But be careful not to become obsessive. Market fluctuations are natural. Rebalancing too often can lead to an increase in trading costs such as capital gains taxes or transaction fees.

How to rebalance

Rebalancing consists of a few key steps:

#1: Set your desired asset allocation
Let’s say it’s April 15 and you’ve got $100,000 in your portfolio. You want to strike the right mix of stocks, bonds, and other assets for retirement. Depending on several factors including your age, comfort level with risk, and retirement goals, you decide the right split for your asset weightings is 40% stocks, 30% bonds, 30% money-market funds.

#2: Determine your portfolio’s existing mix
Now that you know what your target asset allocation is, you can review what you currently have. Most investment accounts can be accessed online where you can view a dashboard that tells you your current mix next to your target.

If your investments are not all in one place – for instance, if you have a 401(k) through your employer, stocks, mutual funds, and a Roth IRA on your own – you’ll want to review your entire portfolio. There are several ways to do this:

  • Track it on our own using a spreadsheet if you’re organized and up for the task.
  • Use an app. If you’re looking for a comprehensive yet free app, try Personal Capital Finance, SigFig Wealth Management, Yahoo!Finance, The Bottom Line, and Ticker
  • Use a financial investment advisor (FIA)

#3: Reassessing Portfolio Weightings
If the weightings of your assets have shifted, generally more than 5%, you may need to adjust your portfolio accordingly. In order to balance your portfolio back to your original allocation mix, you’ll need to sell some assets in the underweighted class you want to decrease and buy assets in the underweighted class you want to increase.

Other factors, such as your financial situation, future needs, and risk tolerance, may cause you to make changes as well. For instance, if you just inherited money from a deceased love one, you may feel emboldened to take on greater risk by adding small-cap stocks to the mix.

Using a Robo-advisor

If managing your portfolio yourself doesn’t sound appealing, and retaining a FIA is cost-prohibitive (many FIAs require you have an asset minimum of $500,000), using a robo-advisor may be a viable alternative for you. A robo-advisor is generally much less expensive than an FIA, offers low account minimums, and takes a lot less time and energy than managing your own portfolios does. Some, like Betterment, even rely on Nobel-Prize winning investment theory.

This isn’t to say a robo-advisor can – or should – replace a live advisor. FIAs provide a much higher degree of personalization than any technology can. FIAs can integrate your finances, taxes, and estate plan – and answer all the questions you have about the investment market while addressing all of your concerns.

Ideally, you have access to both.

At Miramontes Capital, every client receives personal, proactive guidance with our advisors in addition to access to ROBOinvest, our robust robo-advisor service. Much like a holistic-medicine physician, Miramontes Capital focuses on your financial health as a whole, taking into account each of the assets that comprise your portfolio.

Contact Miramontes Capital today to learn more about how you can make the most out of your investments.


Miramontes Capital is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Miramontes Capital and its representatives are properly licensed or exempt from licensure. This blog is solely for informational purposes. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Miramontes Capital unless a client service agreement is in place.