TL;DR
Annual rebalancing captures most of the benefit (~80%) at much lower turnover than quarterly or threshold-based approaches. For tax-sheltered accounts, the simplicity is worth more than the marginal gain from frequent rebalancing.
In short
Daily and threshold rebalancing schemes look great in backtests because they exploit short-term mean reversion, but the trading costs (in taxable accounts) and complexity (in any account) usually erase the gain. Annual rebalancing on a calendar date is operationally trivial and performs nearly as well.
We're working on a full deep-dive for this article — including historical data, charts, and worked examples. In the meantime, you can run a free simulation to explore the underlying numbers yourself.
Frequently asked questions
- Should I rebalance with new contributions instead of selling?
- If possible, yes — directing new money to the underweight asset is tax-free and cost-free. It's the most efficient rebalancing method when you're still accumulating.
- Does rebalancing matter in a single-fund portfolio?
- Not within the fund — it rebalances internally. Across multiple funds (stocks/bonds, US/international), annual rebalancing is the standard.
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