Rebalancing

Trading & Execution

The process of adjusting portfolio holdings to restore target allocations after market movements change the weights. For example, if a portfolio targets 60% stocks and 40% bonds, but market gains push stocks to 70%, rebalancing involves selling stocks and buying bonds to return to 60/40. Rebalancing forces a disciplined approach (selling winners, buying losers) and can enhance long-term returns, though it incurs transaction costs.

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