Rebalancing
The process of returning a portfolio to its target allocation after market movements.
Definition
The process of returning a portfolio to its target allocation after market movements.
Why this concept matters
It keeps risk closer to the level originally intended.
What to watch
Trades may create fees, taxes or poorly timed sales.
Simple example
A 60/40 target that becomes 70/30 can be rebalanced to its original proportions.
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