25th November 2025
Mr. MPF is on a continuous and relentless search to find and deliver the best practical financial education stories to Hong Kong’s 4.79m MPF members. Recently, I came across a longevity story published by Manulife, the Sponsor and Trustee of the “Gold” rated Manulife Global Select MPF scheme, which discusses what Mr. MPF believes is the single most crucial investment decision one could make at this time of the year: rebalancing.
What is rebalancing, really?
It sounds complex, but the concept is simple. Think of carrying shopping bags or lifting weights — you might use one hand for a while, but eventually, you’ll redistribute the load. Investment rebalancing works the same way. It’s the process of selling some assets that have performed well to buy others that have underperformed, bringing your portfolio back to your target asset allocation.
Your target asset allocation is just the mix of different assets you aim to hold over time to reach your financial goals with minimal risk. For example, you may need 60% stocks and 40% bonds to achieve your financial objectives.
Why bother rebalancing?
Market fluctuations can throw your portfolio off balance. For instance, after a strong stock market run (such as the one we’ve seen this year), your portfolio could shift from a planned 60/40 split to 80% stocks and 20% bonds. While this might seem like a win, it also makes your portfolio riskier than intended.
Rebalancing helps you manage risk and lock in gains
It follows the classic investment wisdom: “sell high and buy low.”
- Sell High: When stocks outperform and become a bigger share of your portfolio than planned, selling the excess locks in profits.
- Buy Low: Use those profits to buy underperforming assets, like bonds, bringing your portfolio back to your original 60/40 split (or your chosen allocation).
This disciplined approach ensures you systematically take gains from high-performing assets and reinvest in undervalued areas, increasing the potential for future growth.
More than risk management — it’s about discipline
Rebalancing isn’t just about managing risk; it keeps you disciplined, preventing emotional investment decisions.
- Avoid chasing trends: It stops you from buying into “hot” assets or panic-selling during downturns, both of which can hurt long-term returns.
- Boost long-term growth: While its primary goal is managing risk, rebalancing can enhance returns by consistently following a structured strategy.
Why taking a more active approach matters now more than ever
As people across Asia live longer than ever before, rebalancing gains even greater importance. The 2025 Financial Resilience and Longevity Report for Asia by Manulife Wealth & Asset Management highlights how rising longevity is reshaping retirement planning. It’s no longer just about living longer—it’s about living better.
The report reveals that while people across the region aspire to independent and healthy retirements, financial resilience remains a key challenge. For example, in Hong Kong, where life expectancy is the longest globally at 85.51 years, less than half (48%) of respondents believe they’ll have enough funds for retirement. With a potential 40-year retirement for many, this is a pressing issue.
However, action is being taken. Around 65% of people in Hong Kong are planning to shift part of their cash into higher-return investments—a testament to the growing realization that better investment habits, like rebalancing, are crucial for financial longevity.
“Longevity should be a source of optimism, not anxiety,” says Manulife. “With the right financial habits and guidance, people can turn longer lives into better lives.”
Rebalancing is a powerful tool within this new era of longevity. It ensures your portfolio remains aligned with your long-term goals, helping you achieve financial independence and stability while managing risk.
How often should you rebalance?
There are two common approaches:
- Calendar-Based Rebalancing: Rebalance on a fixed schedule, such as annually or quarterly. It’s simple and ensures regular adjustments but could miss major market shifts or lead to unnecessary trades.
- Trigger-Based Rebalancing: Rebalance only when an asset’s weight deviates beyond a set threshold (e.g., 5-10%). This method is more responsive but can involve more frequent trading during volatile markets.
The best approach is whichever you can stick with. Regularly reviewing your portfolio is key to staying on track with your financial goals.
A few important considerations:
- Retirement Planning: Rebalancing becomes even more crucial as you near retirement. Younger investors may take on more risk for growth, but older investors often shift toward conservative assets to protect their wealth. This mirrors the automatic adjustments in MPF Default Investment Strategy (DIS) funds.
- Diversification: Rebalancing ensures you don’t have all your eggs in one basket, spreading risk across different asset classes.
- Costs: Keep in mind that selling assets incurs transaction costs and may trigger capital gains tax. Consult a financial advisor to align your strategy with your overall plan.
A disciplined approach for a better future
Whether you manage your investments yourself or with an advisor, rebalancing is a key habit for reducing risk and staying aligned with your financial goals. It’s not just about risk management—it’s about financial longevity. As the 2025 Financial Resilience and Longevity Report highlights, the right financial strategies can transform longer lives into better lives.
Truth be told, Mr. MPF is a once-a-year rebalancing type of guy. Just like an annual health check, an end-of-year portfolio rebalance ensures both financial health and peace of mind heading into a new year. Thanks to Manulife for reminding us of the importance of balance—not just in investments, but in life.
The information contained in this blog is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.
