Build a Better Process

Portfolio Rebalance Definition, Discussion and Quiz

Trading frequency can range from second-by-second for high-frequency strategies to annually for buy-and-hold value mandates.
  1. Define - Define portfolio rebalance with context.
  2. Context - Use portfolio rebalance in a sentence.
  3. Quiz - Test yourself.
face pic by Paul Alan Davis, CFA
Updated: February 18, 2021
In my experience, rebalancing portfolios is more of an art than a science. Learn more below.

Outline Back Tip Next

/ factorpad.com / fin / glossary / rebalance.html

An ad-free and cookie-free website.

About Portfolio Rebalancing Frequency and Turnover


Portfolio Rebalance is the process of changing the weights of assets like stocks or bonds in a portfolio by trading. Active portfolios, indexes and benchmarks are all rebalanced. Some common benchmarks are rebalanced according to a set quarterly or annual schedule. Active portfolio managers may rebalance their portfolios as frequently as quarterly, monthly, weekly, daily or even hourly, depending on the desired portfolio turnover.

Synonyms: trade, re-weight, re-allocate

For context, as with most finance and investment activities, the timing for rebalancing a portfolio is highly dependent on the view from the portfolio managers who set up the investment process. Each active manager hopes to have a source of alpha and portfolio turnover is a key component to generating that alpha.

The source of information used typically dictates how frequently and how aggressively to turn over a portfolio. Since public company financial statement arrive quarterly, a firm who is highly dependent on interpreting that data would tend to rebalance after quarterly reports are made public. For more technical-minded traders, the portfolio rebalance frequency may be much more market-dependent.

Portfolio turnover statistics are commonly available on public mutual funds, but less so with private investments, so it's a good data point to inquire about and measure.

In a Sentence

Guy:  A survey showed a change in mutual fund portfolio rebalance frequency after the financial crisis.
Eve:  Yeah, I remember. That's when risk and compliance officers became office rock stars.


Many terms have 4-5 minute videos showing a derivation and explanation. If this term had one, it would appear here.

Videos can also be accessed from our YouTube Channel.

Video Script

If this term had a video, the script would be here.


Click box for answer.

It is more common for active managers to rebalance a portfolio when alpha models change rather than when risk models do. | True or False?


New cash invested in a mutual fund may require a portfolio rebalance. | True or False?

True. Depending on the new percent weight of cash and portfolio manager discretion.

Questions or Comments?

Still unclear on Portfolio Rebalance? Check out the free tutorial Series Quant 101 for a deep dive in Excel.

Related Terms

Our trained humans found other terms in the category portfolio management you may find helpful.

What's Next?

The potential of the FactorPad YouTube Channel is just getting started. Subscribe today and be a part of a cleaner learning experience.

Outline Back Tip Next

/ factorpad.com / fin / glossary / rebalance.html

portfolio rebalance
portfolio optimization
active management
rebalance frequency
asset rebalance
portfolio trading
re-weight portfolio
portfolio holdings
asset trading
stock portfolio trading
bond portfolio trading
rebalance meaning
fund portfolio rebalancing
portfolio turnover

A newly-updated free resource. Connect and refer a friend today.