What Is Rebalancing?

The process of realigning the weightings of a portfolio of assets is known as rebalancing. Rebalancing is purchasing and selling assets in a portfolio on a regular basis in order to preserve an initial or intended level of asset allocation or risk.
Let’s assume your initial asset allocation goal was 50 percent equities and 50 percent bonds. If the stocks had done well throughout the period, the portfolio’s equity weighting might have been boosted to 70%. To return the portfolio to its initial goal allocation of 50/50, the investor may opt to sell some stocks and purchase bonds.