What is portfolio rebalancing?

December 2, 2022

Portfolio rebalancing is a strategy used in investing to adjust the allocation of assets in a portfolio to maintain the desired level of risk and return. This can involve buying and selling assets in the portfolio in order to bring the allocation back in line with the investor’s target asset allocation.

Portfolio rebalancing is important because it can help investors to manage their risk and to ensure that their portfolio remains consistent with their investment objectives. By regularly rebalancing their portfolio, investors can avoid taking on excessive risk and can ensure that their portfolio remains well-diversified.

There are several different ways that investors can approach portfolio rebalancing. One approach is to rebalance the portfolio on a regular schedule, such as once per year or once per quarter. This can help investors to ensure that their portfolio remains well-balanced over time.

Another approach is to rebalance the portfolio based on changes in the market or in the investor’s circumstances. For example, if an asset in the portfolio has experienced significant gains or losses, the investor may choose to rebalance the portfolio to bring the allocation back in line with their target allocation.

Overall, portfolio rebalancing is a strategy used in investing to adjust the allocation of assets in a portfolio to maintain the desired level of risk and return. This can help investors to manage their risk and to ensure that their portfolio remains consistent with their investment objectives.

“The market doesn’t beat them. They beat themselves. Because although they have brains they cannot sit tight.” – Jesse…

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