Rebalancing means selling some investments and buying some other investments in order to return your asset allocation to the desired percentages. Tax-loss harvesting means selling some investments that lost value in order to realize a capital loss and use the loss to offset realized capital gains and income. Tax-loss harvesting is beneficial only in taxable accounts, not in tax-advantaged accounts such as 401k/403b accounts and IRAs.
When you use an advisor who manages your investments for a recurring fee, the advisor will do rebalancing and tax-loss harvesting for you. When you go with an Advice-Only advisor, you will do rebalancing and tax-loss harvesting with help from your Advice-Only advisor.
Advisors who manage your investments for high recurring fees like to show you they are rebalancing your investments and harvesting your tax losses, often quarterly. They do that to make you feel you are getting your money’s worth.
Rebalancing certainly doesn’t need to be done quarterly. Respected author and financial advisor William Bernstein recommended this in his book The Investor’s Manifesto (page 167):
Rebalance your portfolio approximately once every few years; more than once per year is probably too often. In taxable portfolios, do so even less frequently.
Once every few years, ask your Advice-Only financial advisor how your portfolio should be rebalanced. When you get the rebalancing plan, execute them through your online broker. That’s it.
Looking at tax-loss harvesting when the market goes down has some value, but the value diminishes over time. On average, the value of tax-loss harvesting is even less than rebalancing. If you simply did nothing it wouldn’t be a big deal. See Tax-Loss Harvesting vs Rebalancing vs Doing Nothing. Again, if you’d like to check for tax-loss harvesting, you can incorporate the topic as part of your review session with your Advice-Only financial advisor.
You are not turned loose without help when you go with an Advice-Only financial advisor. When you check in with your advisor, he or she will tell you when and how to rebalance or harvest tax loss.