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If you’re saving for retirement on your own and have seen your portfolio triple in value over the past 10 years, it may be time to rebalance.
Rebalancing means changing the mix of assets in your portfolio to match your investment goals. For most retirement savers right now, that might mean selling stocks and buying bonds.
It may sound crazy to sell stocks when the market is skyrocketing. But bull markets don’t last forever. Amendments may be made at any time. And if you’re nearing retirement, you should have some savings in conservative assets, investment experts say.
“All of this just confirms that there are a lot of eggs in different baskets,” said Heather Knight, vice president and national securities coach at Fidelity Investments.
Why should retirement savers rebalance?
There are at least two reasons DIY savers should consider rebalancing in 2026, according to Knight and other investment experts.
Stock prices have risen unbelievably. The S&P 500 has nearly quadrupled in value in 10 years.
In comparison, the bond market has remained relatively flat. So if you started the decade with a certain percentage of stocks and bonds, things would probably be different.
“For the sake of argument, let’s say it’s a 70-30 mix,” said Hannah Quinton, vice president and branch manager at Charles Schwab in San Mateo, California. “Now, all of a sudden, the market has skyrocketed and gone crazy.”
That’s the first reason. Second, stocks have performed so well in recent years, and bonds have performed so well, that many investors are questioning the wisdom of the classic 60/40 portfolio, believing it to be too conservative.
“We felt that stocks were heavily weighted in investors’ portfolios,” said Christine Benz, director of personal finance and retirement planning at Morningstar. “Part of that is that, to be honest with you, bonds themselves haven’t made a very good case over the last 20 years.”
Retirement savers see bond values deteriorating
Bonds are supposed to provide safe, predictable income and act as a foil to the fickle stocks. But bonds also had a tough year. From August 2020 to October 2022, the benchmark Bloomberg Bond Index fell 18%.
These issues, and the plethora of other stock alternatives, have led to arguments that the 60/40 rule is dead. Many retirement savers keep all their investments in stocks until just before retirement, betting that stocks will continue their historic rally.
But here’s the problem. I don’t know when the next fix will come.
“It’s been a long time since we’ve had a market shock that scared us,” Benz said.
In the Great Recession of 2008, the Dow Jones lost more than half of its value. The index did not fully recover until 2013.
That’s why we may need to rebalance.
“A 100% stock portfolio would be very volatile,” said Sabino Vargas, senior financial advisor at Vanguard. “You never know when a stock market correction or recession will occur.”
Here are some tips for rebalancing.
Who needs rebalancing?
Not everyone needs to rebalance.
When a professional oversees your investments, they will be concerned about whether you will meet your investment goals.
If your retirement savings are invested in a target date fund, don’t worry. Rebalancing occurs automatically.
The same applies to other “all-in-one” or “balanced” funds. They maintain a blend of stocks, bonds, and other assets, typically close to a 60/40 ratio.
“If you own any kind of all-in-one fund, it automatically rebalances,” Benz said. “And that’s an incredibly powerful thing.”
How do you set investment goals?
Everyone’s retirement plans are different, and everyone’s tolerance for risk is different. Some investors choose a 60/40 portfolio. Some people invest entirely in stocks until near retirement, and only diversify after retirement.
“We always think about 60-40, but the reality is that doesn’t align with everyone’s goals,” Knight said.
Schwab suggests sample asset configurations based on time period. If you’ve been retired for more than 15 years and are actively investing, you might have 95% stocks and 5% cash. Ten years after you retire, you could own 60% in stocks, 35% in bonds, and 5% in cash. Three to five years after retirement, you could move to 50% bonds, 20% stocks, and 30% cash.
Remember also that diversification is not a simple issue of stocks and bonds. There are several meaningfully different categories of stocks: small-cap versus large-cap stocks, value versus growth stocks, U.S. versus non-U.S. stocks, and across different economic sectors. There are also different types of bonds.
If you only own U.S. stocks or primarily tech stocks, that alone could be reason to rebalance.
When should I rebalance?
The time to rebalance is when your portfolio deviates significantly from your goals. The reason for this could be that some of the assets are increasing in value. Or, the value of the asset may have declined, as stocks did in 2008. Perhaps your investment goals have changed as you approach retirement.
“Rebalancing is an action based on a set of circumstances,” Quinton said. “Depending on the situation, you can reduce the risk or increase the risk.”
One rule of thumb is to rebalance when any component of your portfolio is off target by 5 percentage points. If your goal is 75% stocks and your portfolio is 80% stocks, you may want to rebalance.
How often should I rebalance?
If you’re a DIY investor, experts say you should review your portfolio from time to time. How often you do it is up to you.
“You can check it every 90 days, every six months, every year,” Vargas says. “I want to learn a schedule that I can stick to.”
How do I rebalance?
Experts say there’s no wrong way to rebalance, as long as you follow the schedule and end up with an asset mix that’s close to your goal.
Consider services like Vanguard’s Portfolio Watch or Fidelity’s Portfolio Analysis. This will help you understand your asset mix and where you are “overweight” or “underweight.”
You can adjust the balance by buying, selling, or making new donations. You can also change your 401(k) allocation so that future contributions are directed to assets that are undervalued in your portfolio.
