Year-end portfolio rebalancing typically involves assessing your current portfolio allocations and deciding whether to adjust them to align with your target allocation and financial goals. Whether to reduce or close certain positions depends on the following factors: 1. Performance of Assets Reduce: If an asset has outperformed and its allocation exceeds your target, you might reduce it to rebalance your portfolio. Close: If an asset consistently underperforms, or no longer aligns with your strategy or outlook, consider closing the position. 2. Risk Management Reduce: If an asset class is becoming too risky due to market conditions, you may reduce exposure. Close: If the risk outweighs potential rewards or doesn't fit your risk tolerance, closing might be better. 3. Tax Implications Consider the tax impact of selling assets. Harvesting losses can offset gains, while gains may incur taxes. Reduce if closing would trigger a large tax burden you prefer to defer. 4. Market Outlook If you expect growth in certain sectors or assets, reducing rather than closing allows flexibility for future gains. 5. Reinvestment Opportunities Closing positions frees up capital for other opportunities. However, reducing allows gradual reallocation while maintaining some exposure. 6. Diversification Ensure any decision improves diversification and aligns with your long-term financial goals. Example Strategy: Reduce large-cap equities if they’ve overperformed, but retain some for continued growth potential. Close underperforming small-cap stocks that no longer align with your portfolio’s objectives.