What Rebalancing Is
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What Rebalancing Is
Rebalancing is the process of restoring your portfolio to your target allocation for it.
Things To Know
- Every so often, you need to readjust your portfolio.
You don’t have to do anything to your portfolio for it to change. That’s because some of your investments will do particularly well while others won’t. (That was the whole point of diversifying your portfolio in the first place, remember?) Those investments that have done well will naturally begin to take up more of your portfolio; those that haven’t done as well will take up less of your portfolio. And you don’t have to do a thing for that to happen.
But you need to restore it
But every so often, you need to readjust your portfolio, to restore its original balance. If your investment goal hasn’t changed, your portfolio’s mix shouldn’t, either. Because of market forces, however, it does. And sometimes that means selling your winners.
