When the market feels like a rollercoaster, it’s easy to want off the ride. But for investors with a long-term vision and dreams to achieve, staying the course can be critical to reaching their goals. At the nucleus of a prudent and disciplined investing strategy lies a powerful principle: rebalancing.
What Is Rebalancing?
Rebalancing is the disciplined process of realigning the weightings of a portfolio back to its original or intended allocation. As markets rise and fall, your investment allocations can drift away from your target – exposing you to more (or less) risk than desired.
Imagine a portfolio comprised of 60% fixed income and 40% equities. If stocks surge, you might find yourself with –60% equities and only 40% fixed income – more aggressive than your intended level of risk. Rebalancing would bring you back to your original allocations, helping to preserve your long-term strategy and manage risk more effectively.
Why Don’t More Investors Rebalance?
While the concept sounds simple, human nature often works against it.
“The investor’s chief problem — and even his worst enemy — is likely to be himself.”
– Benjamin Graham1
Many investors tend to do the opposite of rebalancing. They chase what’s performing well and flee from what isn’t – buying high and selling low. It may feel safe, but it can be potentially [SF1] destructive.
This behavior is often rooted in cognitive and emotional biases. According to behavioral finance expert Tim Parker, “For most people, it is impossible to be unbiased in investment decision-making.”2 Fear, overconfidence, loss aversion — all can distort sound judgment and sabotage a long-term plan.
Rebalancing Requires More Than Willpower
Rebalancing is not about guesswork or gut feelings — it requires discipline, data, and robust systems.
At Matson Money, we leverage complex algorithms designed to integrate both empirically tested academic investing research and insights from human behavior science. Our Academic Advisory Board plays a critical role in shaping our strategies. They helps ensure that Matson’s rebalancing decisions aren’t left to chance or emotional reaction.
This isn’t just about making trades. It’s about realigning your portfolio to help preserve your asset allocations according to your acceptable level of risk, reinforcing your financial strategy instead of reacting to market noise.
Why You Need a Coach to Stay the Course
Most people can’t do this alone. Rebalancing consistently — and prudently — over a lifetime requires more than knowledge. It takes courage, patience, and accountability.
That’s why committed financial coaches can be essential to sticking to a prudent investing strategy over a lifetime. They can provide ongoing education, structure, and support — helping you hold firm in the face of volatility and make choices aligned with your long-term vision.
With the right systems and guidance in place, you can help reduce emotional interference, stick to your plan, and invest with greater confidence.
Volatility is inevitable. But panic is not. Rebalancing is the calm, calculated response that can help keep you aligned with your long-term goals.
Ready to Rebalance?
If you’re unsure whether your portfolio still reflects your goals — or you’ve never had a structured rebalancing strategy — now is the time to take action.
Want to learn more about rebalancing, investing with purpose, and creating a portfolio based on science – not emotions derived from market movements – join as at the American Dream Experience, our two-day investor education workshop.
Discover how rebalancing can help you stay aligned with your long-term vision, no matter what the market does next.
DISCLOSURES:
This content is based on the views, opinions, beliefs, or viewpoints of Matson Money, Inc. This content is not to be considered investment advice and is not to be relied upon as the basis for entering into any transaction or advisory relationship or making any investment decision.
All of Matson Money’s advisory services are marketed almost exclusively by either Solicitors or Co-Advisors. Both Co-Advisors and Solicitors are independent contractors, not employees or agents of Matson.
Other financial organizations may analyze investments and take a different approach to investing than that of Matson Money. All investing involves risks and costs. No investment strategy (including asset allocation and diversification strategies) can ensure peace of mind, guarantee profit, or protect against loss.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS
Dr. Terrance Odean is a member of Matson Money’s Academic Advisory Board
Academic Advisory Board members generally receive compensation from Matson Money for their services which include, but are not limited to, independent leadership consulting; co-authoring white papers; and speaking at Matson Money conferences. Advisory Board members may also provide insight to Matson Money on portfolio construction, asset allocation, quantitative analysis, investor behavior and other areas of expertise, as needed. Certain Advisory Board members are employed by or otherwise affiliated with third party advisory firms that offer funds in which Client accounts are invested.
Sources:
1. Odean, Terrance. Making Smart Financial Decisions. Berkeley Haas School of Business, University of California Berkeley. Retrieved 15 April 2025 from https://faculty.haas.berkeley.edu/odean/Video%20Transcripts/Individual%20investors%20part%201%20heuristics.pdf.
2. Parker, Tim. Cognitive vs. Emotional Investing Bias: What’s the Difference? Investopedia. Published May 2, 2023. Retrieved 15 April 2025 from https://www.investopedia.com/articles/investing/051613/behavioral-bias-cognitive-vs-emotional-bias-investing.asp
