Q. Should I rebalance my portfolios? With the new year, I know I’m supposed to assess my portfolio and rebalance. I’ve done well in 2025, so I should be selling some of my equity mutual funds and put them into bonds. But I also think the market will do well next year and I think I’d rather have more in equities. I’m 65 and considering retirement, but I won’t need to take money from my IRAs for a while, I think, because I expect to get a buyout package. What do you think?
— Investor
A. Indeed, the new year is a time when many people take a fresh look at their portfolios.
There are a few things to consider.
Portfolio allocations should be based on both your ability and willingness to tolerate volatility or risk, factors that together comprise your “risk profile,” said Deva Panambur, a fee-only planner with Sarsi, LLC in West New York.
“Ability to take risk is determined by objective factors such as your income, assets, liabilities, dependents, and time horizon,” he said. “Willingness to take risk is a psychological trait that varies from person to person.”
You do not have to determine your allocation based solely on age, Panambur said.
For instance, if you have other sources of retirement income — like a pension — and are comfortable with market fluctuations, you may choose a more aggressive stance, he said. Conversely, if you plan to retire soon and begin withdrawals, you should adjust your allocation to be more conservative, he said.
“Regardless of your profile, it is vital to ensure your portfolio is diversified and resilient,” he said. “Predicting short-term market performance is not a reliable strategy; instead, focus on long-term stability.”
Once you establish your optimal allocation, you must manage risk through rebalancing — the process of selling assets that have performed well and buying those that have relatively underperformed, he said. While there are countless methods regarding the timing and thresholds for rebalancing, the key is to choose a strategy that suits your situation and stick to it, he said.
“In general, rebalancing is a risk-mitigation tool rather than a return-enhancing one. However, it adds significant value by systematically forcing you to `sell high and buy low,’” he said. “This becomes especially critical once you begin withdrawing from your portfolio. Even when markets continue to trend upward, prudent risk management dictates that you maintain your target asset allocation through consistent rebalancing.”
This story was originally published in January 2026.