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"The Most Unsexy Investment Strategy" is Timely! As Bonds Collapse and Stocks Soar, Investors Face a Great Opportunity for Rebalancing

"The Most Unsexy Investment Strategy" is Timely! As Bonds Collapse and Stocks Soar, Investors Face a Great Opportunity for Rebalancing

智通财经智通财经2026/09/10 00:36
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By:智通财经

Financial advisors indicate that, amid global bond sell-offs, stock markets hovering near historic highs, and investors facing geopolitical uncertainties, now may be an especially suitable time to consider portfolio rebalancing.

According to Zhitong Finance APP, financial advisors suggest that now may be an especially suitable time to consider portfolio rebalancing, as global bonds face sell-offs, stock markets hover near historical highs, and investors contend with geopolitical uncertainty. Certified Financial Planner (CFP) and CNBC Financial Advisor Council member Jude Boudreaux stated: "I think this is one of the least exciting investment concepts right now, but probably also one of the most useful."

What is rebalancing?

When investors rebalance, they readjust their asset allocation to target levels. For example, based on their risk tolerance and years to retirement, an investor might determine that a portfolio of 60% stocks and 40% bonds—a classic “60/40 portfolio”—is suitable. Over time, however, markets naturally cause asset allocations to drift from these original proportions.

Stocks have traditionally been the growth engine of portfolios and have performed strongly in recent years. Fueled by enthusiasm for technology companies and artificial intelligence (AI), the S&P 500 returned 24% in 2023, 23% in 2024, and 16% in 2025, all well above the long-term average of about 10%. Although the S&P 500 has dipped slightly from its historic highs in August, stocks are still up over 11% since 2026.

Meanwhile, bonds have continued to weaken significantly amid a wave of broad sell-offs since the Middle East war broke out at the end of February. Generally, bond prices move inversely to their yields, and yields on government bonds globally have risen to multi-year highs, driven by investor concerns over inflation and debt, which have pushed up global government financing costs.

As a result, investment funds tracking long-term bond prices have seen declines in value. On Wednesday, the yield on the U.S. 10-year Treasury note rose to its highest level since 2023. As of Wednesday afternoon, excluding dividends, the iShares 7-10 Year Treasury Bond ETF (IEF) has fallen more than 4% year-to-date, while the Fidelity Long-Term Treasury Bond Index Fund (FNBGX) has dropped more than 5%.

Considering these factors, investors' asset allocations have likely become too heavily weighted toward stocks—meaning their portfolio risk may be higher than originally intended. Cathy Curtis, CFP and CNBC Financial Advisor Council member, stated: “Without a doubt, stocks have taken up a larger proportion in most portfolios, not just those heavily skewed toward tech stocks. The rally has been quite broad across the entire market.”

The benefits of rebalancing

In addition to realigning portfolios to target risk levels, financial advisors say rebalancing offers many other benefits. For example, it helps investors lock in gains from outperforming holdings by shifting profits elsewhere in the portfolio. Jude Boudreaux noted: “This is a disciplined way of buying low and selling high, and historically, that’s been one of the most fundamental investment principles in financial markets.”

In the current market environment, investors are most likely to shift profits from the equity portion of their portfolios into bonds—thereby lowering stock allocations and increasing bond allocations. Advisors point out that even though investors may be cautious about buying bond funds given their current low values, this actually provides an opportunity to buy bond funds at a slight discount. This is the same as the common “buy the dip” strategy often advised when stocks are down.

Rebalancing also gives investors a framework for trading, helping minimize emotional factors and the urge to time the market—something that tends to yield poor results. This is especially important in the current environment, as investors may be tempted to abandon equities due to uncertainties like the Middle East war—heightened inflation concerns sent oil prices over $100 per barrel and the stock market fell on Wednesday.

Cathy Curtis said: “There’s a lot for investors to worry about right now. Multiple geopolitical conflicts, a new (Fed) Chair, the election cycle, an expanding fiscal deficit, and AI-driven disruption. Rather than trying to guess which of these issues will ultimately move the market, investors are better off using rebalancing to bring risk down to more reasonable levels.”

Advisors add this is especially true for investors who, after years of strong returns, feel a false sense of security and want to maintain high equity allocations. Collective Wealth Partners co-founder, CFP, and CNBC Financial Advisor Council member Kamila Elliott commented: “When markets go up, people forget they can also go down.”

“This isn’t a sell-off”

It’s worth noting that, according to Kamila Elliott, investors shouldn’t confuse this rebalancing with selling off all stocks and going fully to cash. She stated: “We’re not telling people to sell everything—this is not a sell-off.” Instead, now is the time to ensure portfolios are once again aligned with individual risk tolerances. Risk tolerance is a measure of how much loss an investor can withstand in their portfolio.

Kamila Elliott said investors nearing retirement can use the current market environment to rebalance some of their equity profits towards cash accounts and use these funds for income in the early years of retirement, just in case equity holdings drop in value.

Kamila Elliott added that investors can assess their own risk tolerance and ability to handle losses by completing a risk tolerance questionnaire. Most major asset management companies' websites offer such questionnaires, such as those from Vanguard Group, Fidelity Investments, and T. Rowe Price. She noted that investors in 401(k) plans will likely be able to log in to their accounts and fill out the relevant questionnaire on the plan administrator’s website.

Of course, financial advisors warn that it’s important to remember rebalancing may have tax implications for some investors, especially those with taxable brokerage accounts. Unlike tax-advantaged retirement accounts such as 401(k)s or IRAs, buying and selling in a taxable account can create a tax burden. Investors might choose to gradually adjust allocations over time, or increase weighting in one asset without selling others in the portfolio.

Cathy Curtis remarked: “Rebalancing doesn’t mean you have to immediately reach your target allocation all at once. New cash flows, withdrawals, and tax-aware trading can also be used to help nudge the portfolio back toward its ideal allocation.”

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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