Successful investing is rarely about finding the perfect investment or predicting what markets will do next.
More often, it comes down to something much simpler, and much harder:
Staying disciplined.
That is where the role of your adviser as an investment coach becomes so important. Helping you stay focused on long-term goals, avoid emotional decision-making, and maintain a sensible investment strategy through changing market conditions is a key part of the value we aim to provide.
This note explores one of the most important, yet often overlooked disciplines in long-term investing:
Instilling the fortitude and discipline to rebalance.
Setting the right level of risk
As part of the financial planning process, you will have spent time with your adviser discussing investment risk and what it means for you personally. This is a crucial foundation, because getting it wrong at the outset can have lasting consequences.
The “right” level of risk depends on:
Your comfort with market volatility and potential losses
The level of return required to meet your goals
Your financial capacity to absorb short-term losses
Your experience, understanding, and confidence as an investor
Once these have been carefully considered, it generally makes sense to keep your portfolio aligned with that agreed level of risk unless your circumstances change materially. If they do, this should be addressed as part of your ongoing review process.
What is rebalancing?
When a portfolio is first created, it is designed around your goals, attitude to risk, and long-term financial plan.
Typically, this includes a mix of:
Growth assets, such as equities, which offer higher long-term return potential but greater volatility
Defensive assets, such as high-quality bonds, which help provide stability during more challenging market conditions
Over time, however, markets move and portfolios naturally drift away from their original structure.
For example, following a prolonged period of strong equity market performance, a portfolio originally holding 60% equities and 40% bonds may become significantly more equity-heavy.
While this may feel positive during rising markets, it also means the portfolio is taking on more risk than originally intended.
Drift in growth/defensice asset exposure of 60/40 portfolio
Source: Albion Strategic Consulting. Data source: Albion World Stock Market Index and Albion Global Short Bond Index (0-5, GBP), before inflation.
May-16 to Apr-26.
Rebalancing simply means bringing the portfolio back towards its intended allocation.
This may involve:
Selling some investments that have performed strongly
Adding to areas that have lagged behind
Restoring the agreed balance of risk within the portfolio
Straightforward in principle. Far less comfortable emotionally.
Why rebalancing can feel uncomfortable
Rebalancing often requires investors to act against their instincts.
When markets have risen strongly, selling winners can feel unnecessary. When markets have fallen sharply, buying equities can feel uncomfortable, especially when headlines remain negative and uncertainty is high.
Yet it is often in these moments that discipline matters most.
During the Global Financial Crisis of 2008–2009, many investors understandably reduced risk as markets fell. A disciplined rebalancing approach would instead have involved selling some defensive assets and buying equities at lower prices.
At the time, that felt extremely difficult. In hindsight, it proved to be a valuable long-term decision once markets recovered.
Rebalancing is about risk, not prediction
Rebalancing is not about trying to improve returns or time markets.
Its purpose is simpler:
To ensure your portfolio remains aligned with your agreed level of risk and long-term financial plan.
As the late David Swensen, former CIO of Yale University’s Endowment and one of the world’s most respected institutional investors, put it:
“The fundamental purpose of rebalancing lies in controlling risk, not enhancing returns. Rebalancing trades keep portfolios at long-term policy targets by reversing deviations resulting from asset class performance differentials. Disciplined rebalancing activity requires a strong stomach and serious staying power.”
Without rebalancing, portfolios can drift significantly away from their intended risk profile, particularly during strong or weak market cycles.
This can become problematic during periods of stress, when larger-than-expected losses may lead investors to abandon their long-term strategy at precisely the wrong time.
The value of staying disciplined
One of the key benefits of working with an adviser is having a steady voice during uncertain times.
Markets will always move. Sentiment will always shift. Headlines will always feel noisy.
A good adviser helps you focus on what truly matters:
Staying aligned with your long-term plan
Maintaining an appropriate level of risk
Avoiding emotionally driven decisions
Remaining disciplined through market cycles
At Wells Gibson, we believe successful investing is built on patience, consistency, and clarity, particularly when markets feel most uncomfortable.
Because often, the greatest risk to long-term success is not volatility itself.
It is abandoning a well-constructed plan at the wrong time.
Ongoing advice matters
If you would like to review your own investment strategy or discuss whether your portfolio remains aligned with your long-term goals, please contact Wells Gibson.
Risk warnings
This article is provided for general information purposes only and does not constitute personal financial advice or a recommendation to take any particular course of action.
Investments can fall as well as rise in value, and you may get back less than the amount originally invested. Past performance is not a reliable indicator of future returns.
The suitability of any investment strategy, including portfolio rebalancing, will depend on individual circumstances, objectives, attitude to risk, and financial needs, all of which may change over time.
References to market events or historic periods are provided for illustrative purposes only and should not be interpreted as a guide to future market behaviour or investment performance.
Rebalancing does not guarantee positive investment returns and cannot eliminate the risk of market losses.
If you are unsure whether a particular investment strategy is appropriate for your circumstances, you should seek professional financial advice before making any decisions.
Wells Gibson Limited is authorised and regulated by the Financial Conduct Authority (Firm Reference Number 731027).
