BeginnerInvesting Strategy
Portfolio Rebalancing: Sell High, Buy Low on Autopilot
Rebalancing automatically forces you to sell assets that have risen and buy assets that have fallen — the opposite of what emotions tell you to do. It's one of the simplest risk management tools that also boosts long-term returns.
TL;DR
Rebalancing automatically forces you to sell assets that have risen and buy assets that have fallen — the opposite of what emotions tell you to do. It's one of the simplest risk management tools that also boosts long-term returns.
What Is Rebalancing?
You set a target allocation: 60% stocks, 40% bonds. After a year, stocks have risen and now make up 70% of your portfolio. Rebalancing means selling enough stocks and buying bonds to return to 60/40. This locks in gains from stocks and buys bonds at lower relative prices.
Key Terms:
target allocationdriftrebalancing