What is Rebalancing?
Periodically bringing a portfolio back to its target weights — selling some winners, adding to laggards.
Rebalancing means periodically bringing a portfolio back to its target weights — selling some of what has risen and buying some of what has fallen.
Without rebalancing, the best-performing assets slowly take over and the portfolio drifts towards more risk than intended. Rebalancing keeps the risk level stable and enforces a disciplined "sell high, buy low".
Typical schedules are monthly, quarterly or yearly, or whenever a weight drifts too far from its target. More frequent rebalancing means more trading costs.
Related terms
See Rebalancing applied to real markets — 30 markets, decades of data — in the Research Terminal.
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