"The least sexy investment strategy" is just right! With the bond market collapsing and the stock market going crazy, investors are facing a good opportunity for rebalancing.

Financial advisors suggest that, amid a global bond sell-off, stock markets hovering near historical highs, and investors grappling with geopolitical uncertainties, now may be an especially opportune time to consider portfolio rebalancing. Jude Boudreaux, a Certified Financial Planner (CFP) and member of the CNBC Financial Advisor Council, stated, "I think this is one of the least sexy investment ideas right now, but it could also be one of the most useful." What is Rebalancing? When investors rebalance, they readjust their asset allocation back to target levels. For example, an investor may have determined that a 60% stock and 40% bond allocationthe classic "60/40 portfolio"is appropriate based on their market risk tolerance and how many years they are from retirement. However, over time, market movements can cause this asset allocation to drift from its original proportions. Stocks are traditionally the growth engine of a portfolio and have performed strongly in recent years. Driven by investor enthusiasm for technology companies and factors like artificial intelligence (AI), the S&P 500 index saw returns of 24% in 2023, projected at 23% in 2024 and 16% in 2025, all significantly above the long-term average of about 10%. Although the S&P 500 index has slightly retreated from its historic peak in August, stocks have still risen over 11% since 2026. In contrast, since the outbreak of war in the Middle East in late February, bonds have continued to weaken significantly in a broad sell-off. Generally, bond prices move in the opposite direction to their yields, and global government bond yields have risen to multi-year highs due to investor concerns about inflation and debt, which are important factors driving up government financing costs worldwide. As a result, the value of investment funds tracking long-term bond prices has declined. The yield on the U.S. 10-year Treasury bond rose to its highest level of 2023 on Wednesday. As of Wednesday afternoon, excluding dividends, the iShares 7-10 Year Treasury Bond ETF (IEF) has dropped more than 4% this year, while the Fidelity Long-Term Treasury Bond Index Fund (FNBGX) has decreased over 5%. Considering these factors, it is likely that investors' asset allocations have become overly weighted toward stocksmeaning their portfolio risk may now be higher than originally anticipated. Cathy Curtis, a Certified Financial Planner (CFP) and member of the CNBC Financial Advisor Council, noted, "There's no doubt that stocks have become a larger portion of most portfolios, not just those heavily weighted in tech stocks. The gains have been quite broad across the market." Benefits of Rebalancing In addition to realigning portfolios to target risk levels, financial advisors say rebalancing offers many other advantages. For example, it can help investors lock in profits from high-performing investments by reallocating gains to other parts of the portfolio. Jude Boudreaux stated, "It's a disciplined way of buying low and selling high, and historically, that's one of the most fundamental investment principles in financial markets." In the current market environment, investors are most likely to shift profits from their stock investments to the bond portion of their portfoliosincreasing bond allocations while decreasing stock allocations. Financial advisors indicate that while investors may approach buying bond funds cautiously given their current depressed values, this actually presents an opportunity to purchase bond funds at a slight discount. This is also common investment advice when stocks decline, known as "buying the dip." Rebalancing can also create a framework for trading that helps investors minimize emotional factors and the impulse to try to time the marketan impulse that can often lead to suboptimal results. This is especially important for investors in the current environment, as they may be tempted to sell stocks in response to uncertainties like the Middle Eastern warparticularly amidst rising inflation fears after oil prices surpassed $100 per barrel, leading to a stock market downturn on Wednesday. Cathy Curtis stated, "Right now, there are a lot of things for investors to worry about. Multiple geopolitical conflicts, a new (Federal Reserve) chair, an election cycle, ever-growing fiscal deficits, and the disruption brought by AI." "Instead of trying to figure out which of these will ultimately impact the market, investors would do better to use rebalancing to bring risk down to a more reasonable level." Financial advisors say the same is true for those investors who, after years of strong returns, have developed a false sense of security and want to maintain a high stock position. Kamila Elliott, co-founder of Collective Wealth Partners, a CFP, and member of the CNBC Financial Advisor Council, remarked, "When the market is rising, people tend to forget that the market can also fall." "This is not a sell-off" Notably, Kamila Elliott stated that investors should not conflate this rebalancing with selling off all their stocks and completely moving to cash. She emphasized, "We're not telling people to sell all their stocksthis is not a sell-off." On the contrary, now is the time to ensure that investors' asset allocations are realigned with their risk tolerances. Risk tolerance is a measure of how much loss an investor can reasonably endure in their portfolio. Kamila Elliott suggested that nearing retirement, investors can take advantage of the current market environment by reallocating some profits from their stock portfolios to cash accounts, using this portion of funds for income in early retirement to guard against a decline in stock values. She added that investors can use risk tolerance questionnaires to assess their capacity for loss and how they cope with losses. Most major asset management companies websites provide such questionnaires, including Vanguard Group, Fidelity Investments, and T. Rowe Price. She indicated that investors participating in 401(k) plans are also likely able to log into their accounts and complete relevant questionnaires on their plans management website. Of course, financial advisors stress that it is important to remember that for some investors, rebalancing may have tax implications, especially those with taxable brokerage accounts. Unlike tax-advantaged retirement accounts such as 401(k)s and IRAs, trading in taxable accounts can incur tax burdens. Investors can choose to gradually adjust their asset allocations over time or increase the allocation of one asset class without selling off other assets in their portfolio. Cathy Curtis stated, Rebalancing doesnt mean you have to reach the target asset allocation in one go. New cash flows, withdrawals, and tax-aware trading can also be used to move the portfolio back to the ideal asset allocation.