What are rebalancing bands or thresholds and how do I set them?
Rebalancing bands trigger a rebalance only when an asset class drifts a chosen amount from its target, instead of on a fixed calendar. A common rule is the 5/25 band: rebalance when any asset is off by 5 absolute percentage points, or by 25% of its own target weight — whichever is smaller. So a 60% stock target would trigger at 55% or 65% (the 5-point band), while a 10% small-cap slice would trigger at 7.5% or 12.5% (the 25% relative band). Bands let small drifts ride untouched, cutting unnecessary trades and taxes, while still capping how far your risk can wander. They tend to be slightly more tax- and cost-efficient than rigid annual rebalancing because you only act when it actually matters. Pick a band, write it down, and check once or twice a year.
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