GLOSSARY TERM
Rebalancing
Rebalancing means adjusting your portfolio back to your original target mix after different investments have grown or fallen by different amounts.
What does this mean in practice?
Over time, one part of your portfolio may become larger than planned. For example, stocks may rise faster than bonds, which changes your original allocation. Rebalancing means bringing the portfolio back to the mix you wanted. This can be done by selling part of what has grown a lot, adding new money to the smaller part or both.
Example
You start with a portfolio of 80% stocks and 20% bonds. After strong stock market growth, the mix becomes 88% stocks and 12% bonds. Rebalancing means moving it closer to 80/20 again.
Why it matters
Rebalancing helps keep your risk level in line with your plan. It stops your portfolio from drifting too far away from the balance you originally chose and supports more disciplined long-term investing.
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