You built a portfolio. You picked your ETFs, split between local and offshore, maybe added some bonds or property. Then the markets did what markets do — some parts went up, others went down, and now your neat 60/40 split looks more like 70/30.

That drift is normal. Left unchecked, it changes your risk. Rebalancing is how you course-correct. Here is when it matters, how to do it, and why most people overthink it.

Disclaimer: I am not a financial advisor. This information is for educational purposes only and should not be considered as financial advice. Always do your own research and consider seeking advice from a qualified financial professional before making any investment decisions.

What Is Rebalancing?

Rebalancing means bringing your portfolio back to your target allocation. If you wanted 60% equities and 40% bonds, but equities rallied and you are now at 70% equities, you sell some equity funds and buy bonds until you are back at 60/40.

It is not about timing the market. It is about keeping the risk level you originally chose. If you want a simple target to maintain, start with a three-fund portfolio and leave it alone between check-ins.

Why Bother?

Three reasons:

• Risk control. If equities drift from 60% to 80%, you are taking more risk than you planned. The next crash will hit harder.
• Sell high, buy low. Rebalancing trims what has become expensive and adds to what is cheaper. That is disciplined, not clever.
• A scheduled check-in. A regular date forces you to look at the portfolio without watching it every day.

When Should You Rebalance?

There are two main approaches.

1. Time-based (calendar method)

Rebalance once a year, every six months, or quarterly. Many investors pick the anniversary of when they started and do it on that day.

Pros: simple, easy to remember.

Cons: you might trade when nothing needs fixing, or wait too long when drift is large.

2. Threshold-based (bands method)

Only rebalance when an asset class drifts beyond a set percentage from its target. Common thresholds are 5 percentage points absolute, or 20% relative.

Example: your target is 60% equities. With a 5 percentage point band, you rebalance if equities go below 55% or above 65%.

Pros: you only act when it matters, which means fewer trades.

Cons: you still have to check. The band does nothing if you never look.

The hybrid approach

Check quarterly, but only rebalance if something is more than 5 percentage points off target. That keeps the calendar discipline without trading for the sake of it.

How to Rebalance: Step by Step

1. Check your current allocation. Log into your broker and work out what percentage each asset class makes up of the whole portfolio — not each account in isolation.
2. Compare to your targets. What was supposed to be 60% equities, 30% bonds, 10% property?
3. Identify the drift. Is anything more than 5 percentage points off target?
4. Trim the overweight side. If equities are 70% of a R100,000 portfolio and should be 60%, you need to move R10,000 — that is about 14% of the equity holdings, not 10% of them.
5. Add to the underweight side. Put that money into bonds or whatever else is light.
6. Keep a record. You will need it if the sale sits in a taxable account. South Africa charges capital gains tax on profits from selling ETFs and unit trusts outside a tax-free wrapper.

The Smarter Way: Rebalance With New Money

Instead of selling, steer new contributions to the underweight side. If equities are too high, pause equity ETF purchases for a few months and buy bonds or a money market fund instead.

That avoids triggering capital gains tax and keeps costs down. For most South Africans in a taxable account, this should be the default. Combined with dollar-cost averaging, it keeps the plan on autopilot.

What About Tax?

Selling an ETF that has gone up can trigger capital gains tax. For individuals, the annual exclusion comes off first. For 2026/27 that is R50,000 of gain, up from R40,000 on 2 March 2026. Then 40% of what is left is included in taxable income. Small rebalances may fall inside the exclusion. Large ones will not.

That is why topping up with new money is often cleaner: you avoid realising gains.

Inside a Tax-Free Savings Account, CGT does not apply, so you can rebalance without a tax bill. The same is generally true inside a retirement annuity or pension fund — and in those products the fund often rebalances for you. For the actual buying mechanics, see How to Buy ETFs in South Africa.

Common Mistakes

• Rebalancing too often. Monthly is overkill. You will pay extra fees and possibly tax for almost no benefit.
• Never rebalancing. Leave a 60/40 portfolio untouched for a decade and it can drift toward 80/20. That is fine if you want more risk. It is not fine if you did not choose it.
• Panic rebalancing. Do not reshuffle because the market crashed. That is when the plan matters most. Rebalance on your schedule, not on a headline.
• Ignoring costs. If trading fees eat a chunk of the amount you are moving, skip it and wait for the next contribution instead.
• Rebalancing each account separately. Look at the whole picture: TFSA, RA, and taxable account together. You may only need to adjust the taxable side.

The Bottom Line

Rebalancing keeps your portfolio aligned with your risk tolerance. It is not exciting. It is not supposed to be. The best method is the one you will actually follow.

Pick a schedule — yearly or quarterly — and stick to it. Use a 5 percentage point band so you are not trading for sport. Prefer new money over selling. Keep costs and tax in mind.

Rebalancing is maintenance, not magic. It will not make you rich. It will stop you accidentally taking more risk than you signed up for.