Strategy
Rebalancing
Definition
The process of realigning portfolio weightings by buying or selling assets to maintain your target asset allocation. If stocks outperform and shift from 60% to 70% of your portfolio, you'd sell stocks and buy bonds to return to 60/40.
Related Terms
Asset Allocation
The strategy of dividing investments among different asset categories like stocks, bonds, cash, and real estate. Proper asset allocation is the primary driver of portfolio returns and risk management.
Portfolio
The collection of all investments held by an individual or institution. A well-constructed portfolio is diversified across asset classes, sectors, and geographies to balance risk and return.
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