The Rebalancing Lie Every Financial Advisor Tells You

Tyler Gardner (0:00)

Just don't let the tax tail wag the investment dog. Too many people, I find, refuse to rebalance or refuse to sell bad investments because they're scared of taxes. And I get it, nobody likes paying taxes. But you know what's worse than paying taxes? Losing money because you were too stubborn to rebalance. I'd rather pay the little L than the big L any day of the week.

Hello friends, this is Tyler Gardner welcoming you to another episode of Your Money Guide on the Side, where it is my job to simplify what seems complex, add nuance to what seems simple, and learn from and alongside some of the brightest minds in money, finance, and investing. So let's get started and get you one step closer to where you need to be. Welcome back to Your Money Guide on the Side. I'm Tyler Gardner, former Financial Advisor, Portfolio Manager, and the guy who spends way too much time thinking about expense ratios so you don't have to. Today we're talking about something that gets treated kind of like financial gospel, but is honestly way less urgent than the industry wants you to believe, rebalancing your portfolio. I get asked about the importance of rebalancing all the time. How often do we need to do it? Should we even do it? When do we do it? And do we do it if we're going to trigger some old capital gains taxes? I have heard your asking and your anxiety around this topic, and I will do my absolute best today to help you in any way and every way I can think through what works best for you, your family, and your great plans for future rebalancing. Now, before we dive in, quick and familiar ask, as always, if this show has been helpful to you in any way, if you've learned something, laughed at something, including ourselves, or just appreciated that someone's finally willing to tell you that you don't actually need bonds in retirement if you don't want them, please consider leaving a review on Apple Podcasts or Spotify. It helps more people find the show, and frankly, it makes me feel slightly less like I'm just shouting into the void. So if you've got 30 seconds, I would genuinely appreciate it. And for those folks who have taken the time to write, thank you. I read them all. And it truly means the world to me that the show has proved helpful for any of you.

All right, back to our grand rebalancing act. Let me start by telling you why I'm addressing this head on. And it's because of you, so I'm thankful to you. I owe this episode entirely to those of you who have written to me and said that most of my short-form content, you know, those little 60-second clips where I walk through the woods and pretend to explain anything of substance and the amount of time it takes most of us to burn a piece of toast in the morning, is about what to do with a certain amount of money, your principal, when you're starting from zero. I've made clips about investing with anything from a hundred bucks all the way up to about three million dollars. And that's usually the point at which I get told by the social media world that I have my head in the sand, and I'm a tone deaf former advisor for a reason. Now that type of content is useful, but it's also not where most of us actually are. Most of us don't all of a sudden have a free million or two to figure out what to do and how to invest from scratch. Most of us already have portfolios. We've been investing for years, maybe decades, and now we're looking at our account and thinking, should we be doing something different with this? Should we rebalance? Should we sell some stocks and buy bonds because we're turning 50? And if we do, what about the taxes? Additionally, many of you have worked with or are working with advisors and are asking the same questions. If they had you invested in X, Y, and Z, and now you're managing your own money, do you just keep that allocation strategy or shift it to reflect something different, even if it means potentially triggering taxes? Good news. Today, we'll hit on all of that. We're going to talk about the entire rebalancing act, what it actually is, why people do it, when it matters, and most importantly, when you can probably just ignore it and go live your life. We'll get right back into it after a quick word from one of today's sponsors. I want to talk about something truly useful if you're trying to get your financial life organized in 2026 Copilot Money. I'll start with this. Most of my friends already use Copilot Money, and they swear by it. Why? Because it's not one of those apps that screams at you for buying coffee. It just shows you where your money is actually going. All your accounts in one place, clean interface, zero judgment. And here's what I like about it. It tracks all your subscriptions automatically, so you're not getting hit with surprise renewals for that streaming service you used once to watch one British detective show. It helps you set savings goals that actually make sense for you, and it leverages AI to categorize your spending so you don't have to sit there manually tagging every transaction like some kind of digital archaeologist. Also, and this matters a lot to me, they're privacy first. They don't sell your data, they're an Apple Design Awards finalist, and they just launched on the web, so you can use it on any device now. And here's the deal. Use code Tyler at sign up, and you'll get two months free. That's worth checking out. Plus, for new users, they're offering 26% off your first year if you sign up through their web app right now. So head to copilot.money, that's C-O-P-I-L-O-T dot money, enter code Tyler for two free months, and give it a shot. If you hate it, cancel. But if you're starting 2026, wanting actual clarity around your money, this is worth trying.