Mastering Quarterly Portfolio Rebalancing for Financial Independence
Quarterly portfolio rebalancing is a disciplined strategy to maintain an investor's desired risk profile. Market fluctuations inevitably cause asset allocations to drift, altering the portfolio's risk exposure. A 60% stock/40% bond portfolio, for instance, might shift to 75% stocks after a bull run, increasing risk beyond the investor's tolerance.
Rebalancing involves selling overperforming assets and buying underperformers to restore the original allocation. This process is less about maximizing returns and more about controlling risk. The quarterly cadence strikes a balance between frequent adjustments and avoiding excessive transaction costs.
While the article focuses on traditional assets, the principle applies equally to cryptocurrency portfolios. Digital assets like BTC and ETH often experience higher volatility, making regular rebalancing even more critical for risk management.
