How to rebalance your ETF portfolio (and why you might want to)

When you invest over the long-term, some parts of your portfolio will grow faster than others. This is an unavoidable part of investing and is just part of growing your wealth.

As this happens, your portfolio can end up looking quite different from the one you built at the start of your investing journey. To fix this, investors rebalance their portfolios.

Here, we’ll go through what rebalancing is and why it’s a lot easier than you might think.

What is portfolio rebalancing?

Rebalancing is one of those simple investing habits that can help keep your portfolio on track.

When you invest, you usually start with a target asset allocation. To use a simplified example, say you want your portfolio to be 60% stocks (more risky) and 40% bonds (less risky).

Markets change all the time. If your stocks perform well for a few months, your balance could shift to 70% in stocks vs 30% in bonds, even though you’ve not added new money.

Rebalancing is the act of adjusting your portfolio so it returns to that initial mix. It’s not about chasing performance. It is about staying aligned with your risk level and long-term goals.

How to rebalance an ETF portfolio

We’ll go into why you might want to rebalance, but first let’s look at how you do it.

1. Check your portfolio

Start by looking at your portfolio analytics to see the split..

On InvestEngine, this tool shows your balance in your portfolio at a glance – it even shows you how the balance is now vs. your original target.

2. Rebalance

If your portfolio is off balance, just find ‘Rebalance portfolio holdings’ in the InvestEngine app. We’ll then show you the changes we’ll make.

Press confirm, and it’s done.

The magic of one-click rebalancing

Our one-click rebalancing system automatically adjusts your holdings to your exact target weights. This saves you from placing multiple buy and sell orders manually.

With other platforms, you’d have to buy and sell your individual investments to get your portfolio back to its original state. This can be quite a time-consuming process, but with us it just takes a couple of taps.

Why rebalancing matters

So, rebalancing is easy (or, at least, it can be). But why would you want to do this and how often should you do it?

1. It’s just good practice

If part of your portfolio grows faster than the rest, your overall risk can increase without you realising. Rebalancing brings your risk back to where you wanted it to be.

2. You’ll automatically “buy low and sell high”

Rebalancing often means selling a little of what has recently risen and buying more of what has become cheaper. This can help support steadier long-term returns.

3. It reduces the temptation to time the market

Rebalancing adds discipline. You stick to your original plan rather than reacting to short-term market movements or headlines.

4. It keeps your investing strategy simple

By checking your allocations regularly and making small adjustments, you avoid large corrections later on. It also means your 60/40 split can stay consistent throughout your investment plan.

How often should you rebalance?

There’s no single right answer here. Some investors stick to rigid timelines, others do it when they remember to.

However, a lot of investors will stick to one of the following techniques:

Time-based: Every three, six, or 12 months

Threshold-based: When the balance shifts beyond a set limit (for example, more than 5% away from the original target)

Contribution-based: Every time you make a big top up, it can be worth rebalancing to make sure it’s allocated correctly.

Whichever approach you choose, consistency matters more than frequency.

When rebalancing might not be necessary

You may not need to rebalance if:

Your portfolio is still close to target
You are adding regular contributions that naturally bring allocations back in line
You use a professionally managed portfolio
Rebalancing is also less common for very short-term investments, where you may prioritise low-risk assets from the start.

Key takeaways

Rebalancing keeps your ETF portfolio aligned with your chosen risk level.
It helps avoid “portfolio drift”, where rising markets increase your risk without you noticing.
It encourages disciplined investing and removes emotion from decisions.
Regular contributions, AutoInvest, and one-click rebalancing make the process easy.

FAQs on how to balance your ETF portfolio

What does it mean to rebalance an ETF portfolio? Rebalancing means adjusting your investments so they return to your original target mix, such as a 60% shares and 40% bonds split.

Why do ETF portfolios drift over time? Different investments grow at different speeds. When markets move, some assets can take up a larger share of your portfolio than you planned.

Why is rebalancing important for long-term investors? It helps keep your risk level aligned with your goals and prevents your portfolio from becoming riskier without you noticing.

Does rebalancing improve returns? Rebalancing is not about boosting returns. It supports discipline by encouraging you to sell assets that have risen and buy those that have fallen.

How often should you rebalance your portfolio? There is no single rule. Many investors rebalance on a schedule, when allocations move beyond a set limit, or after making a large contribution.

Is it possible to rebalance too often? Yes. Rebalancing too frequently can add unnecessary complexity without improving outcomes. Consistency matters more than timing.

How do you rebalance an ETF portfolio on InvestEngine? You can use one-click rebalancing in the app, which automatically adjusts your holdings back to your target weights.

Do regular contributions reduce the need to rebalance? They can. Adding money regularly can naturally bring your portfolio back towards its target allocation, especially when combined with AutoInvest.

Do professionally managed portfolios need rebalancing? Yes, but it is usually done for you. Managed portfolios are typically rebalanced automatically to maintain their chosen risk level.

When might rebalancing not be necessary? You may not need to rebalance if your portfolio is still close to target, you invest regularly, or your investments are managed on your behalf.

Important information

Capital at risk. The value of your investments can go down as well as up, and you may get back less than you put in.

Tax treatment depends on individual circumstances and is subject to change. ETF costs also apply.

ISA transfers may have implications for your investments. Please consider all factors before deciding to transfer.

This content is for information only and is not financial advice. If in doubt you may wish to consult a professional adviser for guidance.