What is rebalancing and why does it matter?
Rebalancing: The alignment your portfolio needs
Ever driven a car out of alignment? You know the feeling. The steering wheel pulls, the ride gets rough and before you know it, you’re drifting off course. Your portfolio can do the same thing without you even noticing. Over time, certain investments grow faster than others and suddenly your mix looks very different from what you planned. That’s where rebalancing comes in.
What rebalancing really means
Imagine your portfolio as a set of wheels. For example, if stocks surge, they can start to dominate your portfolio, throwing off the balance you originally set. Rebalancing is like a wheel alignment. It makes small adjustments, so your portfolio stays closer to its intended path, helping you stay on track toward your goals.
Why balance can drift over time
Let’s use a balanced portfolio as an example. Say you started with approximately 59% stocks, slightly less than 39% fixed income, plus a small 2% slice of Bitcoin.
Here’s the thing: that mix doesn’t stay perfectly balanced on its own. Stocks, bonds and Bitcoin don’t move the same way or grow at the same pace. When one part has a strong run (often stocks, sometimes Bitcoin), it naturally becomes a bigger chunk of your portfolio. Meanwhile, the slower-moving pieces take up less space.
So, without you changing anything, your “balanced” portfolio can quietly turn into a more aggressive one. And since your mix is basically your risk setting, that drift can mean you’re taking on more ups-and-downs than you originally signed up for.
How Fidelity handles rebalancing automatically
Here’s where Fidelity can make life easier. With Fidelity All-in-One ETFs, the idea is that you shouldn’t have to babysit your portfolio to keep it balanced. Each ETF has a “neutral mix,” which is just the target it’s trying to stick to over time.
Then Fidelity handles the maintenance in two simple ways. First, the portfolio is rebalanced annually, which is like doing your regular scheduled check-in to keep everything aligned.
Second, Fidelity also has a “don’t‑let‑it‑drift‑too‑far” rule. If a portfolio moves more than 5% away from its neutral mix between annual rebalances, it may be rebalanced sooner to bring it back toward its target allocation. Certain asset classes, including crypto allocations, are managed using their own set of rebalancing rules.
Keeping your portfolio on track
Rebalancing should be considered routine maintenance for your investments. With Fidelity All-in-One ETFs, it happens automatically, so you can focus on your long-term goals.
