Rebalancing
Rebalancing means adjusting your portfolio back to your target asset allocation.
Why this matters
It helps keep risk aligned with your plan instead of drifting after big market moves.
Simple example
If stocks rise and become 80% of a 70/30 portfolio, you sell some stocks and buy bonds to restore 70/30.
Common mistakes
- Never rebalancing and letting risk drift.
- Rebalancing too often without considering costs/taxes.
- Treating rebalancing as a market-timing signal.