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A technology rally can increase your portfolio’s exposure to tech without changing your investment plan. Rebalancing means checking your current mix against your intended allocation, looking for concentration across individual stocks and funds, then choosing whether to sell, buy with new money, or redirect contributions. The goal is to return toward your existing plan—not to assume that a recent winner should become a larger part of it.
Start with your target allocation, not the rally
Asset allocation is the distribution of investments among categories such as stocks, bonds, and cash. Your intended mix should reflect factors including your goals, time horizon, risk tolerance, and financial situation. When some investments rise faster than others, their share of the portfolio grows and the portfolio can take on a different level of risk.
The SEC’s Investor.gov describes rebalancing as “bringing your portfolio back to your original asset allocation mix.” A rally alone is not a reason to change that target. Reconsidering the target is a separate decision that may make sense when your goals, time horizon, risk tolerance, or financial situation have changed. Investor.gov’s guide to asset allocation and rebalancing explains both the role of allocation and ways to rebalance.
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Find out how much technology exposure you actually have
Review the portfolio’s underlying holdings rather than relying only on account or fund names. Technology companies may appear as individual shares, inside a technology-sector fund, and among the largest holdings of a broad-market index fund. Those overlapping positions can make your total exposure larger than it looks at first glance.
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A fund or ETF is not automatically diversified: one focused on a narrow sector can concentrate risk. Check fund holdings and compare them with your individual stocks, then assess the combined exposure against your intended allocation. Investor.gov’s investing basics discusses diversification and the importance of understanding what an investment holds.
Choose a rebalancing method
There is no single method that suits every account or investor. Your options include selling some positions, using new money to add to underweighted investments, or combining the two.
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Sell overweight holdings and buy underweights
You can sell part of an investment or category that has grown beyond its intended share and use the proceeds to buy categories that are below target. This directly changes the portfolio, but sales may bring transaction fees or tax consequences.
Use new money to add to underweights
If you have money to invest, direct it toward categories that are below target instead of selling an overweight holding. This can reduce the need for sales, although it may take time to bring the portfolio closer to its chosen mix.
Redirect regular contributions
If you contribute regularly, allocate more of those contributions to underweighted categories until the portfolio moves closer to target. This approach changes where new money goes rather than requiring an immediate sale.
Decide when to review
Two common approaches are calendar reviews and threshold-based reviews. Investor.gov gives six- or 12-month intervals as examples of regular reviews, and also describes rebalancing when an asset class or holding crosses a preset percentage threshold. These are options, not universal schedules or official prescriptions. The guidance notes that rebalancing tends to work best relatively infrequently.
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- Calendar review: Check the portfolio on a recurring schedule, such as every six or 12 months, and rebalance if it has drifted from the target.
- Threshold review: Set in advance how far a holding or asset class may move from its target before you act, then review when that limit is reached.
Whichever approach you use, compare your current weights with your target and account for overlapping technology exposure. A preset rule can make the decision less dependent on reacting to headlines or recent performance.
Account for fees and taxes before selling
Before placing trades, consider transaction fees and possible tax consequences. Selling in a taxable account can have different implications from making changes in an account with different tax treatment; the outcome depends on your circumstances and the investments involved. The SEC advises investors to weigh potential tax effects before selling securities. Its year-end asset-allocation bulletin was published in 2012, so its historical tax-rate context should not be treated as current tax guidance.
For U.S. investors, IRS Publication 550 (2025) says a wash sale can occur when stock or securities are sold at a loss and substantially identical stock or securities are acquired within 30 days before or after the sale. The rule’s described acquisitions include purchases in an IRA or Roth IRA, and a loss disallowed under wash-sale rules generally cannot be deducted at that time. Whether securities are substantially identical and the tax result depend on the details; do not assume that a particular substitute investment avoids the rule. See the IRS Publication 550, and consult a qualified tax professional if you are considering material taxable gains or losses. Tax rules outside the United States are not covered here.
Quick Recap
A practical sequence for reviewing your portfolio
- Write down your target mix. Use the allocation you chose for your goals and circumstances; do not infer a new target from recent technology performance.
- Calculate current weights. Compare the portfolio’s actual shares across asset categories with those target percentages.
- Look through funds. Identify technology holdings in individual stocks, sector funds, and broad index funds to see where exposure overlaps.
- Apply your review rule. Decide whether your chosen calendar interval or preset threshold calls for action.
- Compare ways to rebalance. Consider sales, new money, or redirected contributions in light of the account, fees, and tax circumstances.
- Check tax implications before a loss sale. If you are a U.S. investor, review the wash-sale rules and seek qualified tax advice when the trade has material tax consequences.
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