fool.com·Apr 20, 2026
The S&P 500 has increased by about 240% over the past decade, benefiting long-term investors; however, this growth may lead to an imbalance in portfolio allocations, prompting financial advisors to recommend annual rebalancing to maintain diversification and reduce risk.
To maintain optimal diversification and manage risk effectively, consider rebalancing your portfolio annually by trimming positions in stocks that have significantly grown from their original allocations. For instance, if a stock has increased from 3% to over 10% of your portfolio, selling some shares to reduce its weight below 5% can help mitigate exposure to potential volatility in that single asset.