Left alone, your winners grow into an outsized slice, and your mix slowly turns riskier than you chose. Rebalancing pulls it back to plan.
Researchers have shown that regularly rebalancing a diversified mix can earn a small bonus over just holding — sometimes called the “diversification return.”[1]
Like pruning a garden. Trim the plant that’s taking over and the whole bed stays healthier — and oddly, often more productive.
It also enforces “buy low, sell high” automatically, without you having to guess the market. The cost is a little trading, so you don’t do it daily.
Where these numbers come from
Finisdom’s backtester lets you set a rebalancing rule — monthly, quarterly, or yearly — and shows how it would have changed the ride.