How often each year are indexes rebalanced?

This depends on the policy of the index provider. Various indices are most often rebalanced monthly quarterly, twice a year, or once a year. Some indices, such as the FTSE Russell Canada Universe Bond Index, can rebalance daily. 

At least three million indices exist, and in theory index providers could decide on any rebalancing period. 

There can also be ad hoc rebalances for special events, such as the Nasdaq 100 reducing the weighting of the largest stocks in July 2023.

A customised index could rebalance at any time, on any day, and any periodicity, that the index creator chooses. 

What happens during index rebalancing?

The index may do one or more of adds, deletes, and re-weights. It will add new members of an index, which could include new public companies that have recently done an initial public offering. It will delete members that no longer satisfy criteria, which could be because their share price or market value has declined, or could be due to other criteria such as the percentage of their shares classified as “free float”.