Revisiting Your Asset Allocation Plan: When to Reevaluate

But even the most thoughtful allocation won’t stay optimal forever. Life changes. Markets shift. If your portfolio isn’t evolving, it may be falling behind.

Your asset allocation plan may require periodic recalibration. While reacting impulsively to every market movement is ill-advised, several key scenarios may warrant thoughtful reassessment.

Macroeconomic shifts can dramatically reshape economic conditions and asset class performance, and 2025 has offered no shortage of disruption in that regard. With ongoing tariffs and market uncertainty, investors face an increasingly complex landscape. Other market shocks include inflationary pressures, Bank of Canada rate adjustments, currency volatility, pandemics, and systemic financial crises. That’s why regularly reviewing your geographic and asset-class exposure may be an important part of your strategy to remain resilient amid evolving global dynamics.

Market volatility underscores the importance of maintaining a well-diversified portfolio. Such diversification acts as a stabilizer, potentially dampening the impact of downturns and affording flexibility to capitalize on opportunities when other market participants may hesitate.

Over time, market fluctuations can cause your portfolio to float from its intended allocation. Significant market corrections, prolonged bear markets, or exuberant bull runs often create optimal conditions for rebalancing. While sharp declines may depress equity exposure below your target allocation, presenting a “buy low” window, exuberant rallies can inflate equity weights beyond your risk comfort, signaling the need to rebalance toward stability.

There are life stages and events that typically cause people to recalibrate their investment objectives.

For example, if you’re nearing retirement, or expecting a child or other addition to your dependents, you may choose to reflect this in your asset allocation.

These milestones may impact your risk capacity, time horizon and, ultimately, your financial goals. For example, as retirement approaches, your investment horizon gets shorter. As a result, you may need to shift toward more conservative holdings that preserve capital and reduce volatility.

Other examples of impactful life events include marriage or separation/divorce, receipt of inheritance or liquidity events, purchase of substantial assets and career transitions, including retirement planning. Incorporating these life changes enables your portfolio to remain aligned with your evolving circumstances and strategy.

Even without dramatic life or market events, portfolios drift. Stocks may rise and become a larger part of your mix. Bonds may mature or underperform. Rebalancing annually is adequate for most investors, though some choose to do so twice a year or even quarterly. Whichever frequency you’re comfortable with, scheduling a portfolio review allows for systematic rebalancing to realign your holdings with your strategic objectives.

Risk tolerance can be fluid, changing with age, experience, and personal reactions to market turbulence. If you’ve discovered that you’re losing sleep during market dips, your allocation might need adjusting to better reflect your current risk appetite.

Alternative assets are often considered by more sophisticated investors as their portfolios mature. Beyond the “traditional trio” of stocks, bonds and cash, investors may seek portfolio enhancement through alternative assets, including commodities, real estate, cryptocurrencies, and derivatives like options and futures. When thoughtfully allocated, these alternative assets can reduce portfolio correlation, hedge against inflation, and improve resilience, particularly during periods of market stress.

However, alternatives often come with greater complexity and require a higher level of due diligence. That’s where smart risk management tools like Qtrade’s planning tools and calculators can help.

For the prepared investor, volatility is not a threat, but a catalyst for opportunity. In an unpredictable financial environment, your most controllable factor remains your strategy and knowing when it’s time to reevaluate it. While life events may cause some to pause,for others, they present a prime moment to reassess, rebalance, and position for long-term returns. Rebalancing can be a strategic moment to evaluate whether your portfolio is positioned to weather new market realities and capitalize on emerging opportunities.