There are two standard triggers — use both, not just one.
Rebalance annually at a fixed date. [1] This is simple, low-cost, and prevents you from reacting to short-term noise.
Rebalance when any asset class drifts more than 5 percentage points from its target weight — even if the annual date hasn't arrived. [1] This caps the risk of large unintended bets building up silently (e.g., equity weight ballooning from 60% to 75% after a rally).
Before selling anything, use new SIP contributions first. Direct fresh money into underweight asset classes. This:
- Avoids triggering capital gains tax on existing units
- Minimises transaction costs
- Achieves the same rebalancing effect more cheaply [1] [3]
Only sell existing holdings if the drift is too large to correct through new contributions alone.
The SAA should only be structurally revised when there is a material life change — new dependent, property purchase, significant income change. [1]
Reacting to markets is TAA — Tactical Asset Allocation — definition">Tactical Asset Allocation (TAA), which is a separate, optional decision — and one to attempt only after the SAA is solid. [3]
Apply this → Go to Portfolio Builder to check your current asset class weights against your targets and see where drift has accumulated.