Investing term

What is Rebalancing?

Periodically bringing your allocation back to target as market moves push it off.

Rebalancing is the periodic act of bringing your allocation back to target after market moves have pushed it off. It controls risk (stopping winners from quietly dominating) and imposes a sell-high, buy-low discipline. The method can be calendar-based, threshold-based, or done with new contributions — what matters is having a rule and following it rather than drifting forever.

For example

Once a year you check your mix and trim whatever's overgrown back to plan — rebalancing keeping your risk from creeping up unnoticed.

Rebalancing is taught hands-on in Stage 3 — Know Yourself: Risk Tolerance & Time Horizons.

See the lesson →

Related terms

Allocation driftThe slow movement of your portfolio away from its target mix as market values change.Asset allocationThe mix of stocks, bonds, and cash in a portfolio, expressed as percentages.Bear marketA prolonged market decline, conventionally defined as 20%+ from recent highs.DrawdownThe peak-to-trough fall in an investment's value before it recovers.
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