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Rebalancing

 

rebalancing

Every portfolio, over time, will shift from its original asset allocation. This is because, by nature, some investments will outperform others and will take up a larger percentage of your portfolio. While that can be positive in the short term, you may find your portfolio has drifted from its original allocation and is now weighted more toward either stocks or bonds, which can eventually increase risk or decrease the potential to capture gains.

Rebalancing is returning your portfolio to its intended asset allocation mix, which is the best way to keep your long-term strategy on track. Regular rebalancing is a standard recommendation from most financial professionals, who either sell off investments or purchase new investments to restore the correct balance.