Balancing Your Portfolio: How, When, and Importance

Here's what it means to construct a balanced portfolio and how to make sure your portfolio stays that way.

By Matthew Frankel, CFP – Updated Aug 9, 2025 at 9:12 PM | Fact-checked by Frank Bass

Key Points

Balancing a portfolio aligns it with your risk tolerance and investment goals.
Rebalancing maintains your set risk level by adjusting asset allocations as needed.
Portfolio rebalancing ensures buying low and selling high, countering emotional biases.

Balancing your portfolio means constructing a portfolio that fits your individual risk tolerance and investment goals. But it isn't enough to just "set it and forget it." You also need to make sure your portfolio stays balanced.

The process of ensuring that your portfolio stays in the desired allocation is known as rebalancing.

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About the Author

Matt Frankel, CFP, is a contributing Motley Fool stock market analyst and personal finance expert covering financial stocks, REITs, SPACs, and personal finance. Prior to The Motley Fool, Matt taught high school and college mathematics. He holds a bachelor’s degree in physics from the University of South Carolina, a master’s degree in mathematics from Nova Southeastern University, and a graduate certificate in financial planning from Florida State University. He won a SABEW award for coverage of the 2017 Tax Cuts and Jobs Act. He is also regularly interviewed by Cheddar, The National Desk, and other TV networks and publications for his financial, stock market, and investing expertise.

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Matt Frankel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.