A portfolio is supposed to reflect a strategy. Over time, the market has its own ideas, and the allocation starts to drift away from where it was designed to be. Rebalancing is how you bring it back.
The question is when to do it.
The common approach is to put it on the calendar. Once a quarter. Once a year. Some kind of set cadence. The logic makes sense on the surface. Discipline matters, and a schedule keeps you honest.
The problem is the calendar does not know anything about the market. It does not know whether allocations have actually moved. It does not know whether a trade is going to create a tax bill that did not need to happen. It just knows what day it is.
A more thoughtful approach is to let the portfolio itself tell you when it needs attention. When an allocation drifts outside a defined range, you bring it back. When it stays inside the range, you leave it alone. The discipline is still there. It is just responding to what is actually happening instead of what the calendar says.
Rebalancing should be a discipline. It should not be a reflex.
Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss. Asset allocation does not ensure a profit or protect against a loss.