What is rebalancing?
Rebalancing means restoring the mix in your portfolio to what you decided. If you chose 70% stocks and 30% bonds, and stocks have risen so they now make up 80%, you sell a little stock and buy bonds until you are back at 70/30. You sell what has risen and buy what has fallen — automatically and without guessing.
A worked example
You start with 100,000: 70,000 in a stock ETF and 30,000 in a bond fund. A good stock year later, the stocks are worth 91,000 and the bonds 31,000. 122,000 in total — but the mix is now 75/25.
Rebalancing: 70% of 122,000 is 85,400. You sell stocks for 5,600 and buy bonds. Now you are back at 70/30. You have locked part of the gain into the calm part — and if stocks fall next year, it hits you less.
When
- By the calendar: once a year, same date. Simple and sufficient for most.
- By deviation: when one part has drifted more than, say, 5 percentage points from the plan.
- With new money: instead of selling, you simply buy more of what has become too small with next month's saving. That is the cheapest way — no sales, no tax.
Tax and costs
In most countries, selling stocks in an ordinary account triggers tax on the gain (in Denmark, realisation taxation). In accounts taxed on yearly value — the Danish aktiesparekonto, or mark-to-market ETFs — you pay tax on the year's rise anyway, so a sale costs no extra tax there — only commission. So rebalance rarely, and preferably with new money.
The typical beginner's mistake
Rebalancing every month. Every trade costs commission and perhaps tax, and the benefit of hitting 70/30 exactly rather than 72/28 is nil. Once a year is enough — or when it has drifted a lot.
How you see it in Kiggo
Enter your own purchases in Kiggo's portfolio, and it shows gain and loss per holding and in total — so you can discover that one stock that has risen a lot now takes up more than you intended. Kiggo suggests no trades; it shows the numbers so you can decide yourself.
Related terms
Frequently asked questions
Do I need to rebalance if I only have one ETF?
No. The fund does it internally — it follows the index. Rebalancing is about the relationship between several parts, e.g. stocks and bonds, or several funds.
Does rebalancing give a higher return?
Not necessarily. Over long periods where stocks rise most, "let it run" would often have given more. What rebalancing gives is that your risk stays the one you chose — and does not quietly grow.
Kiggo explains — Kiggo does not advise. We never tell you what to buy or sell, and key figures can only be compared between companies in the same industry. The decision is yours. Last updated 2026-09-23.
Written by Claus Frisch, founder of Kiggo. Not an adviser, not a bank — Kiggo explains, you decide.
