Last Updated: October 15, 2026
How often should you rebalance an investment portfolio? The answer depends on your investment strategy, risk profile, financial goals and stage of life. For retirees drawing an income from their investments, portfolio reviews have an additional purpose: ensuring there are sufficient reserves to fund future spending without being forced to sell growth investments when markets are falling.
At Veyron Wealth Group, investment management is guided by the CARE® Investment Philosophy: Core Investments, Active Investments, Reserves and Enhanced Returns. This approach considers how investments work together to support a client’s financial goals, rather than focusing solely on individual investment returns.
Rebalancing helps maintain the intended investment strategy as markets move. For retirees, it can also provide an opportunity to replenish CARE Reserves after a strong market run, where appropriate. The aim is to maintain a suitable balance between long-term growth and having funds available to support retirement spending.
There is no single review schedule that suits every investor. However, regular reviews, combined with attention to portfolio movements and reserve levels, can help keep an investment strategy aligned with changing circumstances.
Learn more about Veyron’s CARE® Investment Philosophy.
Understanding portfolio drift
Portfolio drift occurs when market movements change the proportions of an investment portfolio. For example, a portfolio initially invested in 60% growth assets and 40% defensive assets might move to 68% growth and 32% defensive assets after a strong share market performance.
Although the portfolio has increased in value, its risk profile has also changed. The investor now has greater exposure to growth assets than originally intended.
The opposite can happen after a market downturn, when growth investments fall in value relative to defensive investments. The portfolio may become more conservative than intended.
Whether this drift requires action depends on the agreed investment strategy, the size of the change and the investor’s circumstances. Rebalancing is not about reacting to every market movement. It is about checking that the portfolio continues to reflect the investor’s objectives and capacity to tolerate risk.
For retirees, the review should also consider the amount held in cash and defensive fixed-interest investments. A portfolio can deliver strong returns while its reserves decline through regular pension withdrawals. Maintaining an appropriate reserve balance is an important part of managing the retirement income strategy.
How CARE® portfolios approach rebalancing
Veyron’s CARE® Investment Philosophy recognises that different components of a portfolio serve different purposes. The strategy considers investment growth, opportunities for active management, liquidity and the role of selected investments in supporting returns.
Core Investments
Core Investments form the strategic foundation of the portfolio. They may include diversified multi-sector investments, exchange-traded funds and other investments selected to align with the client’s agreed risk profile and long-term objectives.
Active Investments
Active Investments provide scope for selected allocations to markets or asset classes based on investment opportunities and relative valuations. These decisions operate within the broader investment strategy rather than replacing it.
Reserves
Reserves provide a relatively stable source of funds for planned spending. For retirees, the principle is to hold approximately two years of required income withdrawals in cash and defensive fixed-interest investments, subject to individual circumstances.
The purpose is to help fund living expenses without having to sell growth assets during a market downturn. Reserves are not intended to eliminate investment risk, but to provide a buffer between day-to-day spending and the longer-term investment portfolio.
Enhanced Returns
Enhanced Returns may include direct Australian shares, often focused on established companies and potential dividend income, including franking credits where available.
The allocation to each component depends on the client’s circumstances and agreed investment strategy. Find out more about Veyron’s wealth management and creation approach.
Why retirees may replenish reserves after strong market returns
When share markets perform strongly, growth investments may increase substantially in value. This can provide an opportunity to review whether some gains should be realised and transferred to CARE Reserves.
The decision is not based on predicting that markets are about to fall. Markets can continue rising, and identifying the precise market peak is not a reliable investment strategy.
Instead, the focus is on maintaining the retirement income plan. Regular withdrawals gradually reduce reserves, while strong returns may increase the value of growth investments. Reviewing the portfolio allows the adviser to assess whether reserves remain sufficient for upcoming income needs.
Where appropriate, some investments that have performed well may be sold to replenish the reserves. This helps maintain a source of funds for future spending and may reduce the need to sell equities when markets are depressed.
The decision should reflect the client’s spending requirements, current reserve balance, portfolio allocation, investment outlook, tax position and transaction costs. It should not be an automatic instruction to sell a fixed percentage of investments every time markets rise.
The objective is to maintain a sustainable retirement income strategy, not to time the market.
How much should you hold in CARE Reserves?
The appropriate reserve balance depends on how much income a retiree needs from their investments and what other income sources are available.
As a starting point, consider a retiree who needs to withdraw $60,000 each year from their investment portfolio to supplement other income. A reserve equivalent to two years of these withdrawals would be $120,000.
The calculation should be based on the amount actually required from the portfolio, after taking account of other relevant income such as the Age Pension, other pensions or rental income. It should also consider expected major expenses and the client’s broader financial position.
The principle is straightforward: by holding approximately two years of required withdrawals in cash and defensive fixed-interest investments, the retiree has a source of funds for living expenses that is less exposed to daily share market movements.
If equities fall sharply, the client can generally continue drawing from these reserves rather than immediately selling shares at depressed prices. Meanwhile, the growth component can remain invested in accordance with the agreed strategy, allowing time for markets to recover—although recovery is never guaranteed.
When markets perform strongly, the adviser can review whether some gains should be realised to restore the reserves to their intended level. This creates a disciplined process for managing withdrawals and reviewing the portfolio through different market conditions.
The two-year reserve is a guide, not a guarantee or a universal rule. The right amount will depend on the client’s needs, other resources and investment strategy.
Calendar-based versus threshold-based rebalancing
Two common approaches to portfolio rebalancing are calendar-based reviews and threshold-based reviews.
| Approach | How it works | Potential benefit |
|---|---|---|
| Calendar-based | Review investments at regular intervals, such as annually or at scheduled advice reviews. | Provides a consistent review process. |
| Threshold-based | Review when an asset allocation moves beyond a predetermined tolerance. | Helps identify material changes in portfolio risk. |
| Combined approach | Conduct regular reviews and take additional action when circumstances or portfolio movements warrant it. | Combines discipline with flexibility. |
A combined approach can be useful because it avoids unnecessary trading while allowing significant changes to be addressed when they occur.
For CARE® investors, the review should look beyond asset allocation alone. It can assess reserve levels, planned withdrawals, upcoming expenses, investment performance and whether the portfolio remains suitable for the client’s risk profile.
The frequency of reviews and any thresholds used should reflect the portfolio and the investor’s circumstances. There is no single rebalancing schedule that is appropriate for everyone.
A practical example: replenishing retirement reserves
Consider a retiree whose diversified portfolio is designed to provide long-term growth while funding regular withdrawals.
During the year, share markets perform strongly and the value of the portfolio’s growth investments increases. Meanwhile, the retiree continues drawing income, reducing the balance in CARE Reserves.
At the next review, the adviser considers three questions:
- Has the portfolio changed materially? Growth assets may now represent a larger proportion of the portfolio than intended.
- Are the reserves sufficient? The remaining balance may no longer provide the intended buffer for future withdrawals.
- Should some gains be realised? Selling part of the investments that have increased in value may help replenish reserves and maintain the intended investment strategy.
If the review supports action, selected investments may be sold and the proceeds transferred to CARE Reserves. The amount and timing should reflect the client’s needs, portfolio structure, tax implications and transaction costs.
This does not guarantee that losses will be avoided or that the portfolio will last throughout retirement. It does, however, provide a structured way to maintain funds for planned spending and reduce reliance on selling growth assets during a downturn.
Can you rebalance without selling investments?
In some circumstances, rebalancing can be achieved without selling existing investments.
For investors who are still accumulating wealth, new contributions can be directed towards underweight asset classes. This can gradually bring the portfolio closer to its target allocation.
For retirees, withdrawals can sometimes be taken from assets that are above their intended allocation. However, the source of each withdrawal should be considered in the context of the retirement income strategy, rather than selected solely because an investment has recently performed well.
For example, selling an investment held outside superannuation may trigger capital gains tax. The adviser should consider whether it is more appropriate to use available cash flows, make adjustments over time or sell particular investments to restore the intended allocation.
For retirees using CARE Reserves, the immediate priority is to ensure there are sufficient funds to meet planned spending. Replenishing reserves after strong returns can be part of the strategy, but the decision should remain consistent with the client’s overall investment plan.
Tax and transaction costs matter
Selling investments can involve brokerage, transaction costs and capital gains tax. The tax outcome depends on the investment, ownership structure, holding period and applicable tax rules.
Investments held personally outside superannuation may generate a capital gain when sold for more than their cost base. Superannuation has different tax treatment, depending on the fund and whether assets support an accumulation interest or a retirement-phase income stream.
Consequently, the most appropriate rebalancing method can differ between investors and between accounts held by the same person.
Before selling investments, consider whether the benefits of the proposed adjustment justify the associated costs and tax consequences. Tax should be part of the decision, but it should not override the need to maintain an appropriate investment strategy and sufficient funds for retirement spending.
Avoid emotional decisions during market highs and lows
Investor behaviour can have a significant impact on long-term outcomes.
When markets rise, investors may become overconfident or assume recent returns will continue. When markets fall, uncertainty can lead investors to sell growth investments at an unfavourable time.
A disciplined review process helps keep decisions focused on the financial plan rather than short-term market sentiment.
For retirees, maintaining suitable reserves can provide a practical buffer. Knowing that planned spending can be funded from cash and defensive fixed-interest investments may reduce pressure to sell equities during a downturn.
However, reserves do not remove investment risk or guarantee that the portfolio will last throughout retirement. They support the broader strategy by providing liquidity for spending while the remainder of the portfolio remains invested for its intended purpose.
When should you review your portfolio?
An annual review can be a useful starting point for many investors, but additional reviews may be appropriate when circumstances change.
Consider reviewing your portfolio when:
- Markets have performed strongly and the value or allocation of growth investments has changed materially.
- CARE Reserves have fallen below the level needed to support planned withdrawals.
- The portfolio has drifted from the agreed risk profile.
- Spending requirements or major expenses have changed.
- Your retirement plans or personal circumstances have changed.
- The investment strategy needs to be reassessed.
These are reasons to review the portfolio, not automatic instructions to trade. The adviser should consider the full circumstances before recommending changes.
How Veyron can help
Portfolio rebalancing is most effective when it forms part of a broader financial plan. It should consider investment performance alongside cash flow, retirement spending, risk tolerance, tax and the need for long-term financial security.
Veyron Wealth Group uses its CARE® Investment Philosophy to help clients maintain an investment strategy aligned with their circumstances and goals. For retirees, this includes reviewing whether reserves remain appropriate and whether strong market returns present an opportunity to replenish them.
The aim is to balance long-term investment growth with the practical need to fund life today.
Learn more about Veyron’s Investment Advice and Retirement Planning services.
Boring money, exciting life. A disciplined investment process can help you spend less time worrying about market movements and more time enjoying the retirement you have worked towards.
General advice warning: This article contains general information only and does not take into account your objectives, financial situation or needs. It is not personal financial advice. Investment values can rise and fall, returns are not guaranteed, and past performance is not a reliable indicator of future performance. The appropriateness of any rebalancing or reserve strategy depends on individual circumstances. Consider seeking advice from a qualified financial adviser before making investment decisions.
