Rebalancing Your Portfolio

By Mitchell J. Smilowitz, CPA

Maintaining your asset allocation (the mix of stocks, bonds and cash in your portfolio) is an important part of effective financial planning. Each type of asset fluctuates differently in response to market conditions. Over time, the proportion of the various assets in your portfolio changes. If you don’t address this change by rebalancing, you may drift into a portfolio allocation that exposes you to greater investment risk than you want or one that results in a significantly lower return than you anticipate.

Those Taking Distributions from Their JRB Retirement Account – especially those taking distributions from the Stable Value Interest Fund – have an additional reason for rebalancing. It is prudent to replenish your conservative investments when riskier equity investments are up. This allows you to “sell high,” and lock in the investment gains, to fund your retirement distributions.

How Does a Portfolio Get Out of Balance?

Here’s an example of how a portfolio allocation can drift. On January 1, 2023, an investor has a $200,000 portfolio with 50% invested in an S&P 500 stock index fund and 50% invested in a U.S. core bond index fund.

At the end of 2023, the S&P 500 had a return of 26.3%; Morningstar’s U.S. Core Bond Index gained 5.3%. At the end of the year, the portfolio would have about $126,300 in equities and $105,300 in bonds. To bring the portfolio back into 50/50 balance requires reallocating about $10,500 from the equity investment to the bond portfolio. The result is $115,800 in each investment.

This is a very simple example and not meant as investment advice. You probably have more than two funds in your portfolio.  Regardless of how many funds you own – or the proportions of each asset in your portfolio – the principle is the same. As the proportion of the assets varies from your desired allocation, it is important to bring them back into balance – so you stay on track. If you are not sure about your target asset allocation, please contact the JRB.

Who Needs to Rebalance?

Most investors with a diversified portfolio should consider rebalancing.

Retirees should consider replenishing the funds from which they take their distributions. These are generally funds that protect assets, such as the JRB’s Stable Value Interest Fund, or more traditional bond funds. This allows you to sell equity investments when they are high to support your long-term retirement income. (Consider keeping about six-to-eight years of anticipated distributions in a conservative fund you use for retirement withdrawals.)

Who Does Not Need to Rebalance?

You may not need to rebalance your portfolio if all of your investments are held within a target date fund such as the Fidelity Freedom Funds offered by the JRB because they rebalance automatically.

When to Rebalance

While there’s no official timetable for rebalancing, it’s a good practice to evaluate your asset allocation once a year as part of an annual assessment of your financial plan.

Sell High. Buy Low.

Rebalancing your portfolio has another advantage. The performance of different asset classes can vary greatly from year-to-year. While it may seem counterintuitive to shed the strongest performers, what you’re doing in effect is selling high and buying low.

You don’t know which asset class is going to outperform the others next year. Rebalancing allows you to reap the full rewards of diversification. Trimming back on a winner allows you to buy a laggard, protect your gains and position your portfolio to benefit from a change in market performance.

How to Rebalance Your Portfolio

The JRB’s recordkeeper, Alerus, makes it easy to rebalance the funds in your JRB account.

  • Log into your account
  • Under “Select Plan,” click on “The Joint Retirement Board 403(b)(9) Retirement Plan"
  • Under the Main Menu, select “Change My Investments”
  • Click on “Change My Current Account Balance”
  • Set the target percentage of each mutual fund you choose in the “Realign to” column
  • Scroll down and click “Next” (note: the percentages that you enter do not register until you remove the cursor from that field. Click away from the last number you entered for the total to update and the “Next” button will then be available.)
  • Clicking "Next" allows you to review what you entered and preview the transaction that will be made. If everything looks good, scroll down and consider reviewing the prospectus of any fund in which you are investing. Click on the checkbox acknowledging that you were offered the prospectuses.
  • When you are satisfied with the change, click “Finish.” The changes will be made at the next market close, typically 4 pm ET Monday-Friday.

In addition, Alerus allows you to schedule an automatic rebalancing of your account quarterly, semi-annually or annually.


Rebalancing your portfolio is an important part of a long-term investment strategy. It is useful to review your asset allocation annually. How far has your asset allocation deviated from your investment plan? Are there changes to your investment goals that may warrant a change in asset allocation?  Not sure how to answer these questions? The JRB can assist you. Please contact us via email or call 888-JRB-FREE (572-3733).

February 2024