What is Rebalancing?
Rebalancing is moving a portfolio back to its target mix after market moves have pushed it off course. That can mean selling some of what has grown and buying what has lagged, or simply sending new money to the part that is underweight. Its purpose is to keep risk where you set it, not to boost returns.
Why Rebalancing matters
Without it, a portfolio slowly becomes riskier or safer than intended, usually without anyone deciding that it should.
Related terms
Lessons that use this term
- Portfolio rebalancing: how and when to reset your mix
- Asset allocation: choosing your mix of stocks, bonds and cash