What is portfolio rebalancing?
Rebalancing moves asset weights altered by markets back toward a planned target.
Definition, calculation and mechanism
If equities grow beyond a target, new contributions may go elsewhere or some shares may be sold. The aim is to maintain risk, not forecast each price move. Trading frequency creates costs and possibly taxes.
Interpretation, examples and limits
A rule may use a calendar or target deviation band. Automatically buying every decline may be inappropriate if goals or cash needs changed. A written strategy can reduce reactive decisions.
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