# The risk you didn't choose

_Systematic Investing . 2026-07-13 . By Tanmay Kurtkoti. Educational, illustrative, not advice._

A friend set up a tidy 60/40 three years ago. Equity for the growth, debt so he could sleep at night. He was proud of it, and then he never touched it again.

Grown nicely, he told me. I asked him what the split was now. He didn't know. So we opened the statement, and it was not 60/40 anymore.

Here is the quiet mechanism nobody warns you about. Equity compounds faster than debt, so its share of your portfolio creeps up every single year you leave the mix alone. Assume equity earns about 12 a year and debt about 6.5. A 60/40 you never rebalance drifts to roughly 66/34 in five years, and about 71/29 in ten. Eleven points more equity, eleven points more risk, and not one of those points was a decision you made.

Now the part that actually costs you. That equity share is at its highest after a long run up, which is exactly when a correction is most likely. When the market finally turns, say equity down 40 and debt up 2, the drifted 71/29 falls about 27.8 percent. The 60/40 you actually chose falls 23.2. That is nearly 5 extra points of drawdown on a bet you never placed, and it needs a bigger bounce just to climb back to even.

This is why I think rebalancing gets sold the wrong way. Everyone frames it as a free-return trick, buy low and sell high. The bigger job is quieter. It drags your mix back to the risk level you picked on a calm day, before the market talked you into carrying more.

Leaving it alone is not caution. It is handing the rally your risk dial, and on the way up the rally turns it all the way to maximum: