Trimming what rose and topping up what fell keeps your risk where you chose it.
Rebalance back to your plan.
60% shares, 40% bonds, 20 real years. You choose. The other rebalances every year.
Shares that run ahead quietly change your plan. Rebalancing puts the risk back where you chose it.
← Red LinesRed Line 44 of 48 The idea The numbers How people do it Where it bends This game’s numbersHow strong the proof is Where it comes from
Left alone, the part that grows fastest takes over, and your mix drifts into more risk than you chose. Moving it back sells some of what rose and buys what fell.
The plan is 60% shares, 40% bonds. After a boom, €10,000 is €7,500 shares and €2,500 bonds. Moving €1,500 from shares to bonds puts it back to €6,000 and €4,000.
Once a year, or when a part drifts more than a few points from the plan. New monthly money can do it too: put it into whatever fell behind.
Rebalancing too often adds costs and taxes.
S&P 500 and US 10-year bond yearly returns, Aswath Damodaran, NYU SternWorked out on this page
=Outside the four steps: it follows from the arithmetic
True by the sumsWhat rose becomes a bigger share by itself; moving back to your split puts the mix, and so the risk, where you chose. That is arithmetic.
- Best Practices for Portfolio Rebalancing Colleen M. Jaconetti, Francis M. Kinniry Jr. & Yan Zilbering, Vanguard Research, 2010
Checked 2 Nov 2026 · How we grade
- A Strong proof: Many good studies or long official data, from different teams or countries, point the same way.
- B Good proof, with limits: Solid studies agree on the direction, but the size varies, or the data covers few places or few kinds of people.
- C Mixed proof: Some good studies for, some against, or the evidence covers only part of the line.
- D Thin proof: Mostly one book’s argument, one survey or stories. It may be wise, but it has not been tested well.
- = True by the sums: It follows from arithmetic, so no study can overturn it. We still show what real data says.
David F. Swensen, Unconventional Success (2005). In our words, not quoted.
See it in numbers: Rebalancing (From Zero)
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