Finance
How does portfolio rebalancing work?
Rebalancing means periodically adjusting your investments back to your target mix. Over time, winners grow and shift your allocation; rebalancing sells some of what's grown and buys what's lagged, keeping your risk level steady and enforcing 'buy low, sell high'.
See it in motion.
Watch a 2-minute animated lesson that shows exactly how portfolio rebalancing works.
Step by step
- 1Investments drift from your target mix over time.
- 2Rebalancing restores the original allocation.
- 3You trim winners and top up laggards.
- 4It keeps risk in check and enforces discipline.
Frequently asked questions
- How does portfolio rebalancing work?
- You sell some assets that have grown and buy those that lagged, returning to your target allocation.
- Why rebalance a portfolio?
- To keep your risk level consistent and avoid being overexposed to whatever has recently soared.
- How often should you rebalance?
- Commonly once or twice a year, or when allocations drift beyond a set threshold.