Chapters in Portfolio & Risk Management
Chapter 5 of 6 · 5 min read
Rebalancing and the portfolio optimizer
Bring a drifting portfolio back to target, and what an optimizer can and cannot do.
Over time winners grow and the mix drifts from your plan. Rebalancing sells some of what has grown and buys what has lagged to restore target weights, which controls risk and enforces discipline.
Optimizers
An optimizer suggests weights that maximise expected return for a risk level, using historical returns and correlations. Its inputs are estimates, so results are sensitive to the data window. Treat output as a starting point and check turnover, tax and liquidity.
Key takeaways
- Rebalance on a rule (time or threshold), not on emotion.
- Optimizer output depends heavily on its inputs.
- Account for tax and costs before trading.
Put it into practice
Open the live page on Market Intelligence and see this concept on real data.
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Education only, not investment advice. Updated 2026-10-09.