It's a trade-off. The answer depends on your risk tolerance. Seeking higher rewards demands higher risk. If you want advice, I would recommend hiring an expert to design a plan which meets your needs.
As a sample point, NOT necessarily right for anyone else...I'm considered an aggressive investor, and my own spread is still more conservative than many folks. I'm entirely in low-cost index funds, distributed as
- Domestic bonds: 29%
- Large cap stocks: 41%
- Small cap stocks: 8%
- International stocks: 17%
- REIT and similar: 5%
... with the money tied up in a "quiesced" defined-contribution pension fund being treated as a low-yield bond.
Some of these have beaten the indexes they're tracking, some haven't. My average yield since I started investing has been a bit over 10%/year (not including the company match on part of the 401k), which I consider Good Enough -- certainly good enough for something that requires near-zero attention from me.
Past results are not a guarantee of future performance. This may be completely wrong for someone at a different point in their career and/or life and/or finances. I'm posting it only as an example, NOT a recommendation.
Regarding when to rebalance: Set some threshhold at which things have drifted too far from your preferred distribution (value of a fund being 5% off its target percentage in the mix is one rule I've sometimes used), and/or pick some reasonable (usually fairly low) frequency at which you'll actively rebalance (once a year, 4x/year, whenever you change your car's oil, something like that), and/or rebalance by selecting which funds you deposit additional money into whenever you're adding to the investments. Note that that last option avoids having to take capital gains, which is generally a good thing; you want as much of your profit to be long-term as possible, and to avoid triggering the "wash sales" rule. Generally, you do not have to rebalance very frequently unless you are doing something that I'd consider unreasonably risky, or unless you're managing such huge sums that a tiny fraction of a percent still adds up to real money.