Maintaining a well-balanced investment portfolio is essential for long-term financial success. As market conditions change and asset values fluctuate, your once carefully allocated investments can become unbalanced. Rebalancing your portfolio is the process of readjusting your asset allocation to bring it back in line with your original investment strategy. In this comprehensive guide, we’ll explore what it means to rebalance your portfolio, how often you should do it, and provide you with ten tips for best practices to ensure your investments remain on track.
What Does It Mean to Rebalance Your Portfolio?
Rebalancing your portfolio refers to the process of realigning your investments to maintain your desired asset allocation. Asset allocation is the distribution of your investments across various asset classes, such as stocks, bonds, and cash. Over time, the performance of different assets can cause your portfolio to become imbalanced, potentially exposing you to more risk than you are comfortable with. Rebalancing aims to restore your portfolio’s intended mix of assets.
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