Due to fluctuations in the capital market, the weighting between your individual investments in your portfolio will change - inevitably.

Simple example: You have a portfolio of different asset classes. Each one makes an initial part of 5%. In the course of time some asset prices will rise while others fall.

After some time, let's say one asset class makes 13% of your portfolio (= strong price increase).
Another asset class makes 3% of your portfolio (= slight price decrease)

Through rebalancing, you can re-shift your portfolio so that it again corresponds to your initial asset allocation (= 5%) ... or at least close to it.Related to Equity & REIT ETFs:

Scenario example: You have a MSCI World ETF, initially weighted at 70%. And a MSCI Emerging Markets ETF, initially weighted at 30% in your portfolio.

Your Emerging Markets ETF outperforms and now has a portfolio percentage of 50%. Your MSCI World performs only very moderately.

Overall, your asset allocation is now 50:50.

In order to get back to the initial level of 70:30, it would now be time for a rebalancing.

That means you sell the capital gains amount of your Emerging Market ETF, so that its portfolio percentage of 50 is reduced back to the initial 30%.

Rebalancing enables you to keep your risk level.

As a long-term investor, it is important to apply your risk tolerance and maintain the risk level set in your asset allocation.

This is where rebalancing comes into play as a corrective.

Many investors intend to hold securities with rising prices for as long as possible. Many people are rather reluctant to part with "winner" securities. That's absolutely human! 🙂

However, please keep in mind: Asset classes that have outperformed, will occasionally also underperform.

Conversely, it is often the case that asset classes that have weakened will bounce back.

Against this background, it is a good idea to rebalance your portfolio at regular intervals. This way you can take partial profits and invest them in other asset classes.

Now we come to the question: How often should you rebalance?

In my opinion: On an annual or bi-annual basis is enough. It is best to set a fixed date, for example at the beginning or the end of a year.Following aspect is also important: At which percentage range is a rebalancing useful?

Here I would recommend the following rule of thumb: If an ETF's current portfolio percentage deviates by more than 5% from your initial asset allocation, then you can rebalance.Finally, we turn to the question on how to "technically" carry out a rebalancing:1) Rebalancing via savings plan

If you invest in ETFs via a savings plan, you can use it to rebalance your portfolio.

You can do this by changing the savings rate for the respective ETF or suspending the savings plans of the respective ETF for a while if you want to reduce the percentage share of an ETF.

You then take the savings rate that is freed up, and temporarily divide it among the savings plans of other ETFs.

The best thing about rebalancing with a savings plan: There are usually no costs for you. Depending on your securities account provider, you can change your savings plan once every quarter or half-year, for example, which is sufficient.Important note:

Rebalancing via savings plans reaches its limits if:

your general capital stock is already quite large
but your savings plans have a low savings rate in relation to this.

In this case it often makes more sense to buy or sell shares.

2) Rebalancing through partially selling / partially buying

When it comes to higher amounts or if you don't invest money through savings plans, you have the following option:

You can (partially) sell ETF shares and buy new ones to rebalance your portfolio.

In practice: For example, you sell some of your ETFs that have outperformed - in order to reduce the riskier ETF parts of your total portfolio.

In addition, you can increase those ETF shares that have not performed so well - by buying more.

Equity & REIT ETFs: Buying (more), selling, rebalancing

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Module 1: Wealth creation - the big picture

Chapter 1: What is the overall purpose of this online course?

Chapter 2: "Wealth creation = Raising income + Investing"

Chapter 3: Building your personal financial infrastructure

Chapter 4: What type of investor are you?

Chapter 5: Investment Mindset

Chapter 6: Tracking my investment philosophy

Module 2: Investing in Equity ETFs & REIT ETFs

Chapter 1: Intro

Chapter 2: Objective ETF selection criteria

Chapter 3: Subjective ETF selection criteria

Chapter 4: Using ETF screeners for your search

[work in progress] Chapter 5: Live simulation... let’s buy ETFs together!

Module 3: Investing in Value Stocks

Chapter 1: Intro

Chapter 2: Fundamental Analysis (Step 1) - Pre-screening

Chapter 3: Fundamental Analysis (Step 2) - Qualitative Criteria

Chapter 4: Fundamental Analysis (Step 3) - Quantitative criteria

Chapter 5: Fundamental Analysis (Step 4) - Fair Value and investment decision

[work in progress] Chapter 6: Live simulation... let’s buy value stocks together!

[in planning stage] BONUS: Value stock analysis with AI/prompt engineering

Module 4: Investing in Growth Stocks

Chapter 1: Intro

Chapter 3: Fundamental Analysis (Step 2) - Qualitative Criteria

Chapter 4: Fundamental Analysis (Step 3) - Quantitative criteria

[work in progress] Chapter 6: Live simulation... let’s buy growth stocks together!

[in planning stage] BONUS - Chapter 7: Growth stock analysis with AI/prompt engineering

Module 5: Investing in REITs

Chapter 1: Intro

Chapter 3: Fundamental Analysis (Step 2) - Qualitative Criteria

Chapter 4: Fundamental Analysis (Step 3) - Quantitative criteria

[work in progress] Chapter 6: Live simulation... let’s buy REITs together!

[in planning stage] BONUS - Chapter 7: REITs analysis with AI/prompt engineering

Module 6: Your personal investment management

Chapter 1: Investment strategies

Chapter 2: Portfolio compilation

Chapter 3: Situation management

[work in progress] ADD-ON MATERIAL

[in preparation] How to read balance sheets, income statemtents and cash flow statements

[in planning stage] How to monitor macroeconomic developments