Rebalancing

A theoretical optimal portfolio gets out of balance every time the price of any asset changes. In general, this is not a huge deal, as the change is minor. However these changes add up over time.

It is important to choose when to rebalance:

• Time based: every month, quarter, year
• Band based: every time the difference is more than x%

And also how to rebalance:

• Via a pre-packed product (e.g. a 60/40 ETF)
• With new money from income
• By selling one asset to buy others

However in the end these choices generally do not have a huge impact.