Client-friendly guide to portfolio rebalancing

Key takeaways

• Explain how rebalancing helps ensure portfolios remain aligned with the intended level of risk over time.

• Show clients that without rebalancing, strong-performing assets can dominate a portfolio, changing its overall risk profile.

• Highlight the importance of a disciplined, repeatable rebalancing approach to help clients stay focused on long-term goals through changing market conditions.

Why would you want to sell an investment that is performing well? The discipline of portfolio rebalancing to maintain a portfolio’s risk profile is an essential component of long-term investment success, but explaining the logic to clients can be difficult.

For asset allocation strategies where the target mix of equities and bonds is fixed or based on a pre-determined range, portfolio rebalancing entails selling the best-performing securities in a portfolio over a given time period and using the proceeds to invest in the poorer-performing securities, with a view to maintaining the client’s desired risk level.

While this might seem counterintuitive to some clients, the practice can help reduce portfolio volatility, avoid portfolio ‘drift’ and ultimately help investors stick to their long-term investment strategy. That’s because without systematically rebalancing, portfolio allocations can drift from their intended long-term target as the returns of constituent assets diverge, leading to much higher portfolio risk.

Our client-friendly rebalancing guide explains why portfolio drift happens, what it can look like in practice and how regular rebalancing helps keep a portfolio aligned with the investor’s risk preference and goals. Download the explainer and use it with clients to explain why and how their portfolio is rebalanced.

The guide covers:

• How a portfolio's asset allocation can drift over time

• The impact that rebalancing can have on a portfolio's risk profile

• An explanation of how regular rebalancing helps maintain a portfolio's target allocation

Share this guide with clients to help them understand how portfolio rebalancing can support their long-term goals.

Investment risk information

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

Past performance is not a reliable indicator of future results.

Performance figures shown may be calculated in a currency that differs from the currency of the share class that you are invested in. As a result, returns may decrease or increase due to currency fluctuations.

Important information

For professional investors only (as defined under the MiFID II Directive) investing for their own account (including management companies (fund of funds) and professional clients investing on behalf of their discretionary clients). Not to be distributed to the public.

The information contained herein is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information does not constitute legal, tax, or investment advice. You must not, therefore, rely on it when making any investment decisions. 

The information contained herein is for educational purposes only and is not a recommendation or solicitation to buy or sell investments. 

Issued by Vanguard Group (Ireland) Limited which is regulated in Ireland by the Central Bank of Ireland.

Issued by Vanguard Asset Management, Limited which is authorised and regulated in the UK by the Financial Conduct Authority.

Issued in EEA by Vanguard Group Europe GmbH, which is regulated in Germany by BaFin.

© 2026 Vanguard Group (Ireland) Limited. All rights reserved. 

© 2026 Vanguard Asset Management, Limited. All rights reserved.

© 2026 Vanguard Group Europe Gmbh. All rights reserved.