DayCents

Rebalancing

Rebalancing means periodically selling what's grown and buying what's lagged to return your portfolio to its target asset allocation. It enforces 'buy low, sell high' automatically and keeps your risk from drifting higher than you intended as stocks outrun bonds.

Most investors rebalance once a year or when an allocation drifts past a set threshold. In tax-advantaged accounts it's tax-free; in taxable ones, directing new contributions to the lagging asset rebalances without triggering capital gains.