2026-02-21

How to Rebalance a Global Portfolio

Rebalancing a portfolio that spans multiple countries, currencies, and tax jurisdictions is fundamentally different from rebalancing a single-country portfolio. The standard advice — sell the winners, buy the losers, return to your target allocation — breaks down when currency movements distort your allocations, selling triggers tax events in different jurisdictions, and transaction costs vary wildly depending on which market you are trading in. This guide covers how to actually do it.

Why Rebalancing Matters More for Global Portfolios¶

In a single-currency portfolio, your allocation drifts because asset prices move at different rates. US large caps have a strong year, and suddenly they are 45% of your portfolio instead of the 35% you targeted. Straightforward.

In a multi-currency portfolio, you have a second source of drift: currency movements. Even if every holding in your portfolio stays perfectly flat in local currency terms, FX fluctuations can shift your allocation significantly.

Consider this example. You hold a 50/50 split between US equities (denominated in USD) and European equities (denominated in EUR), measured in your home currency of GBP.

In this scenario, both positions returned 0% in their local currencies. The entire drift came from GBP weakening against USD and strengthening against EUR. If you rebalance based on local currency returns, you see no drift and do nothing. If you rebalance based on home currency values — which is what actually matters for your purchasing power — you see a 2.7 percentage point shift.

This is why understanding how FX affects investment returns is a prerequisite for effective rebalancing.

Step 1: Define Your Target Allocation in Home Currency¶

Your target allocation must be denominated in your home currency, not in the local currencies of your holdings. If your home currency is USD and you want 40% US equities, 30% international developed, 20% emerging markets, and 10% bonds, those percentages should reflect the USD value of each bucket.

This sounds obvious, but many international investors track their allocations in local currency terms without realizing it. A $100,000 US stock position and a 95,000 EUR European ETF position are not a 50/50 split — they are whatever the current EUR/USD exchange rate makes them.

How to Structure Your Target¶

A global allocation for a nomad or expat might look like this:

The specific percentages depend on your risk tolerance, time horizon, and where you expect to settle. If you plan to eventually return to the United Kingdom, tilting toward GBP-denominated assets reduces your long-term currency risk. If you are settling in Portugal, EUR-denominated holdings matter more.

Step 2: Measure Your Current Allocation Accurately¶

Before you can rebalance, you need to know where you stand. This requires converting every holding to your home currency at the current exchange rate.

If you hold: - $50,000 in a US brokerage - CHF 25,000 in a Swiss account - 8,000 SGD in a Singapore savings account - 0.5 BTC on a crypto exchange

You cannot simply add those numbers. You need the current USD/CHF, USD/SGD, and USD/BTC rates to determine your total portfolio value and each position’s share of it.

This is one of the core problems FlashFi solves. Every holding is automatically converted to your home currency, and you can see your allocation by ticker, asset type, or sector at a glance. See how this compares to tracking manually in our article on how to track investments in multiple currencies.

Step 3: Choose a Rebalancing Strategy¶

There are three main approaches to rebalancing, each with different trade-offs for global portfolios.

Calendar Rebalancing¶

You rebalance on a fixed schedule — quarterly, semi-annually, or annually. On the scheduled date, you compare your current allocation to your target and make trades to close the gap.

Pros: - Simple and disciplined - Reduces emotional decision-making - Easy to plan around

Cons: - May miss significant drift between rebalancing dates - Could trigger unnecessary trades if the portfolio is already close to target - Does not account for tax-loss harvesting opportunities

Best for: Investors who want a hands-off approach and are not particularly tax-sensitive.

Threshold Rebalancing¶

You set a tolerance band around each allocation target — for example, plus or minus 5 percentage points. You only rebalance when a position drifts outside its band.

Pros: - Reduces unnecessary trading - Responds to significant market movements - Can be combined with calendar rebalancing (check thresholds quarterly)

Cons: - Requires monitoring (or a tool that does it for you) - In volatile currency markets, you may trigger rebalancing frequently

Best for: Most international investors. The threshold approach naturally adapts to market conditions and reduces transaction costs.

Cash Flow Rebalancing¶

Instead of selling positions that are overweight, you direct new contributions toward underweight positions. You never sell to rebalance; you only buy.

Pros: - No tax events from selling - No transaction costs from selling - Works well during the accumulation phase

Cons: - Requires regular contributions large enough to move the needle - Cannot correct large drifts quickly - Does not work if you are in the distribution phase (drawing down your portfolio)

Best for: Investors who are still building their portfolio and making regular contributions. Freelancers and remote workers who receive income in multiple currencies can be strategic about which currency they invest in — see our guide on tracking freelance income across currencies.

Step 4: Account for Tax Implications Across Jurisdictions¶

This is where global rebalancing gets genuinely complicated. When you sell a holding to rebalance, you may trigger a capital gains tax event. The rate you pay, the holding period that qualifies for preferential rates, and whether you can offset losses against gains all depend on the tax jurisdiction.

Key Tax Differences by Country¶

United States: Long-term capital gains (held over 1 year) are taxed at 0%, 15%, or 20% depending on income. Short-term gains are taxed as ordinary income. Tax-loss harvesting is allowed, subject to wash sale rules (30-day window). US citizens abroad are subject to these rules regardless of where they live. See IRS Publication 550 for details.

United Kingdom: Capital Gains Tax applies at 18% (basic rate) or 24% (higher rate) for most assets. There is a tax-free annual exemption (currently 3,000 GBP as of 2024-25 per HMRC guidance). ISA wrappers allow tax-free gains. See our UK portfolio tracker page for more.

Portugal: The Non-Habitual Resident (NHR) regime (for those who registered before March 2024) may exempt foreign-source capital gains. Standard rate is 28% for residents. See our Portugal page for details.

Singapore: No capital gains tax for individuals. This makes Singapore one of the most rebalancing-friendly jurisdictions. You can sell and rebuy freely without tax consequences.

UAE: No personal income tax or capital gains tax. Similar to Singapore, the UAE allows friction-free rebalancing.

Australia: 50% CGT discount for assets held over 12 months. Non-residents do not get the discount. See ATO guidance. More on the Australia page.

Tax-Aware Rebalancing Strategies¶

Given these differences, the order in which you sell matters:

1. Sell in tax-free jurisdictions first. If you hold positions in a Singapore or UAE brokerage, sell there to rebalance without tax impact.

2. Use tax-advantaged accounts. ISAs (UK), Roth IRAs (US), and superannuation (Australia) all allow tax-free rebalancing. Do as much rebalancing as possible inside these wrappers.

3. Harvest losses. If a position is both overweight and at a loss, selling it accomplishes two goals: it reduces the allocation and generates a tax loss you can use to offset gains elsewhere. In the US, the wash sale rule prevents you from repurchasing a “substantially identical” security within 30 days. In the UK, there is a similar 30-day bed and breakfast rule (Section 106A TCGA 1992).

4. Consider holding period. If a position is close to qualifying for a long-term capital gains rate (e.g., nearly 12 months in the US or Australia), it may be worth waiting rather than selling now at the short-term rate.

5. Use cash flow rebalancing for taxable accounts. Direct new contributions to underweight positions rather than selling overweight ones.

Step 5: Manage Transaction Costs¶

Rebalancing a global portfolio often involves trading on multiple exchanges in different currencies. The costs include:

• Brokerage commissions: These vary significantly. Interactive Brokers charges as little as $1 per US stock trade but may charge more for exotic markets. Saxo Bank and Swissquote charge more per trade. Check your brokerage’s fee schedule.

• FX conversion costs: If you need to sell USD-denominated holdings and buy EUR-denominated ones, you will pay FX conversion fees. IBKR charges approximately 0.002% (with a $2 minimum). Banks and some brokerages charge 0.5% to 1.5%. Always check the spread.

• Settlement timing: US equities settle T+1. Many international markets settle T+2. Crypto settles immediately. If you are selling in one market to buy in another, the settlement mismatch means your capital is in transit for a day or two.

• Market impact: For small portfolios, this is negligible. For positions over $100,000, consider using limit orders rather than market orders, especially in less liquid international markets.

Minimizing Costs¶

• Consolidate trades: rebalance less frequently but make larger trades to reduce the per-trade impact of fixed commissions.
• Use FX conversion at your brokerage rather than converting through your bank. Brokerage FX rates are almost always better.
• If you are rebalancing with new contributions, buy directly in the target currency rather than converting and buying.

Step 6: Execute and Document¶

When you execute your rebalancing trades:

1. Calculate the exact amount to buy or sell for each position to reach your target allocation.
2. Execute sells first, then buys (to ensure you have the cash available).
3. Record every trade with the date, price, quantity, FX rate, and commission.
4. Update your portfolio tracker.

Documentation is especially important for international investors because you may need to report capital gains in multiple jurisdictions, claim foreign tax credits, or demonstrate cost basis to tax authorities that use different calculation methods (FIFO, average cost, specific identification).

FlashFi automatically records all transactions and maintains your cost basis across currencies, which simplifies both ongoing tracking and tax-time reporting. If you are building a multi-currency portfolio, having this data in one place is essential.

A Practical Rebalancing Checklist¶

Use this checklist each time you rebalance:

• [ ] Convert all holdings to home currency at current exchange rates
• [ ] Compare current allocation to target allocation
• [ ] Identify positions outside your tolerance bands
• [ ] Check holding periods for tax-sensitive positions
• [ ] Prioritize sells in tax-free jurisdictions or tax-advantaged accounts
• [ ] Check for tax-loss harvesting opportunities
• [ ] Calculate FX conversion costs for cross-currency trades
• [ ] Execute sells, then buys
• [ ] Record all trades with FX rates and commissions
• [ ] Verify new allocation matches targets

When to Skip Rebalancing¶

Not every drift requires action. Consider skipping if:

• All positions are within your tolerance bands
• The drift is driven by temporary FX movements that you expect to revert
• Selling would trigger a large short-term capital gains tax bill
• Transaction costs would exceed the portfolio improvement from rebalancing

A 1% drift in a $50,000 portfolio is $500. If your transaction costs and tax impact exceed $500, the rebalance costs more than it helps.

Summary¶

Rebalancing a global portfolio requires thinking in your home currency, choosing a strategy that fits your contribution pattern and tax situation, and being aware of the costs and tax consequences of trading across jurisdictions. Cash flow rebalancing is the most tax-efficient approach for investors still building their portfolio. Threshold rebalancing, checked quarterly, strikes the best balance between discipline and cost efficiency for established portfolios.

The hard part is not deciding to rebalance. It is knowing what your allocation actually is when your holdings are spread across countries and currencies. That visibility is the starting point.

Track your global allocation with FlashFi — and know exactly where you stand before you trade.

By David Brougham