How would you "reset"/rebalance a bad portfolio and do it right?

Let me try to address this scientifically.

Investment markets, particularly stocks and bonds, are yield-generating and therefore makes positive investment returns over the long-term (barring short-term temporary corrections). If you look up the global indices like the MSCI All-Country World Index, you would noticed that they are upward sloping over the long-term.

Therefore, by delaying a restructure of your investment portfolio, you have a high probability of incurring opportunity losses (ie losing out on market returns). Try to muster the courage to admit and accept the mistake, and then muster the courage to correct the mistake and move on.

Sell off the losers and keep your winners.

If you think some of your "reds" is due to a temporary issue or might achieve a turnaround (research to find out), then they might be worth keeping as you wait.