Rebalancing

AAA

DEFINITION of 'Rebalancing'

The process of realigning the weightings of one's portfolio of assets. Rebalancing involves periodically buying or selling assets in your portfolio to maintain your original desired level of asset allocation.

INVESTOPEDIA EXPLAINS 'Rebalancing'

For example, say your original target asset allocation was 50% stocks and 50% bonds. If your stocks performed well during the period, it could have increased the stock weighting of your portfolio to 70%. You may then decide to sell some of your stocks and buy bonds to get it back to your original target allocation of 50/50.

RELATED TERMS
  1. Market Portfolio

    A theoretical bundle of investments that includes every type ...
  2. Constant Ratio Plan

    An asset allocation strategy in which assets are assigned a fixed ...
  3. Asset Allocation

    An investment strategy that aims to balance risk and reward by ...
  4. Portfolio

    A grouping of financial assets such as stocks, bonds and cash ...
  5. Risk Tolerance

    The degree of variability in investment returns that an individual ...
  6. Diversification

    A risk management technique that mixes a wide variety of investments ...
Related Articles
  1. Solutions For Concentrated Positions
    Investing Basics

    Solutions For Concentrated Positions

  2. Achieving Optimal Asset Allocation
    Investing Basics

    Achieving Optimal Asset Allocation

  3. 6 Asset Allocation Strategies That Work
    Options & Futures

    6 Asset Allocation Strategies That Work

  4. 4 Steps To Building A Profitable Portfolio
    Mutual Funds & ETFs

    4 Steps To Building A Profitable Portfolio

Hot Definitions
  1. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  2. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  3. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  4. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  5. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  6. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
Trading Center