Why your portfolio drifts, and what to do about it

Allocation decisions get made once and then quietly unmade by the market. An investor who chose sixty per cent equity, and then enjoyed five strong equity years, may be holding seventy-five per cent equity without having made a single decision to increase risk.

The uncomfortable part is that drift always moves you towards whatever has recently done well — which is to say, towards more risk immediately before it matters most.

A rebalancing approach that survives reality

• Pick bands rather than a date: rebalance when an asset class moves more than five percentage points from its target.
• Rebalance with new contributions first. Directing fresh money at the underweight asset avoids a taxable sale.
• Check no more than twice a year. More frequent checking produces more frequent trading, and trading costs money.

Rebalancing feels wrong every single time — it requires selling the thing that has done well to buy the thing that has not. That discomfort is precisely the mechanism by which it works.