Should You Rebalance Your Investment Portfolio Monthly? Pros & Cons

When you invest, your portfolio will naturally shift over time. Some investments grow faster than others. That’s great for returns, but it can throw off your original mix of assets. That’s where rebalancing comes in.

Rebalancing means adjusting your investments back to your intended balance. For example, if you started with 70 percent in shares and 30 percent in bonds, and shares have grown to 80 percent, rebalancing would mean selling a portion of your shares and topping up your bonds.

This helps keep your risk level steady and your portfolio aligned with your plan.

So what about monthly rebalancing? Is it worth checking in that often, or could it do more harm than good?

Let’s explore the pros, the cons, and how to decide if monthly rebalancing is right for you.

What does monthly rebalancing involve?

Monthly rebalancing means reviewing your portfolio every month to check if your current mix still matches your target allocation. If it has drifted, you make small adjustments to bring it back in line.

For example, if your target is 60 percent equities and 40 percent bonds, but equities have grown to 65 percent, you would reduce your equity holdings slightly and add to your bond investments.

Some platforms allow you to automate this process, while others require you to do it manually.

The advantages of monthly rebalancing

Helps keep your risk under control

Markets move quickly. Monthly checks can help stop your portfolio from drifting too far from your intended risk level, giving you more control and stability.

Encourages discipline

Having a regular schedule encourages you to take action based on a plan rather than reacting emotionally to market headlines.

Supports buy-low, sell-high behaviour

By trimming back what has gone up and buying more of what has gone down, you are reinforcing one of the golden rules of investing.

Potential downsides of monthly rebalancing

It may lead to overtrading

Rebalancing too frequently can mean making unnecessary changes. This adds complexity and could even work against your long-term performance.

Possible tax implications

If you are investing in a general investment account, frequent trades might create taxable events. This is not a problem in ISAs or pensions, but it's something to keep in mind elsewhere.

Not always necessary

In many cases, monthly rebalancing does not significantly outperform quarterly or annual approaches. You may be adding effort without extra benefit.

Is monthly rebalancing right for you?

If your investments are held in a tax-advantaged account like an ISA or pension, and your platform offers automatic, fee-free rebalancing, then monthly adjustments can be helpful.

But if you are managing everything yourself or if your platform charges for trades, less frequent rebalancing might be a better fit.

The key point is that any rebalancing is better than none. It’s more important to stay roughly on course than to fine-tune every month.

A balanced approach for most investors

Many investors choose to monitor monthly but rebalance less often, such as every three or six months. Others only make changes when their portfolio has shifted by more than 5 or 10 percent.

You do not need to be exact. What matters is building a process that works for you and helps you stick with your plan.

Final thoughts. Keep it simple and consistent

Rebalancing is not about constantly fiddling with your investments. It’s about protecting your chosen level of risk and making sure your portfolio reflects your goals.

Monthly rebalancing might be right if you want a hands-off, automated approach and your platform supports it. But it is not the only way to stay on track. Whether you rebalance monthly, quarterly, or once a year, what matters most is doing it with purpose.

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