Traditional Investing & Portfolio Theory

What is portfolio rebalancing?

Portfolio rebalancing is the practice of periodically buying and selling holdings to return a portfolio to its intended target weights after market movements have shifted them. As some assets grow faster than others, the mix drifts from the original plan, and rebalancing restores it. For example, if equities rise and push their share above target, you trim them and add to the underweight assets. It is a discipline for keeping a portfolio aligned with its design rather than a method of increasing returns, and it carries trading and tax considerations.

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