Rebalancing Guide

Why rebalance?

Rebalancing helps you keep portfolio risk aligned with your target allocation. It can reduce drift caused by strong market moves and enforce consistent decision-making.

Start simple and pick rules you can execute consistently.

• Threshold: Rebalance when an asset moves outside your allowed drift band.
• Calendar: Rebalance on a fixed schedule such as weekly or monthly.
• Percent of Portfolio: Rebalance when total value changes by a configured percentage.
• Risk Parity: Tilt weights based on relative volatility using price history.
• DCA-Weighted: Split rebalancing into smaller recurring orders to reduce timing risk.

Practical workflow

1. 1Define target allocations (for example BTC 50%, ETH 30%, stablecoins 20%).
2. 2Set drift tolerance per asset (for example ±5%).
3. 3Pick one trigger model (threshold, calendar, or percent-of-portfolio).
4. 4Estimate fees, slippage, and taxes before executing trades.
5. 5Execute orders in small batches when liquidity is thin.
6. 6Review performance monthly and adjust rules only when assumptions change.

• Use position limits to avoid concentration risk.
• Keep an emergency cash/stablecoin buffer.
• Avoid over-trading in high-fee environments.
• Track every rebalance decision in notes for post-mortem review.

Common mistakes to avoid

• Changing strategy every week based on short-term price action.
• Ignoring costs, especially on smaller portfolios.
• Treating model outputs as guaranteed returns.
• Using borrowed funds for routine rebalancing.