What Is Rebalancing?
Definition and plain-English explanation of "Rebalancing"
Rebalancing is the process of realigning the weightings of a portfolio back to its target allocation. For example, if stocks rise sharply and now represent 80% of your portfolio (vs your target 70%), you would sell some stocks and buy more bonds to rebalance. Rebalancing forces you to sell high and buy low — the opposite of what emotions typically drive you to do.
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