Rebalancing is the process of adjusting the composition of an investment portfolio to bring it back to its original or desired asset allocation. The goal of rebalancing is to maintain the desired risk and return profile of the portfolio over time.

When investors initially allocate assets to a portfolio, they typically choose a mix of investments based on their goals, risk tolerance, and time horizon. However, as the market moves and individual investments perform differently, the portfolio's asset allocation can drift away from the original target. For example, if a portfolio was initially split 50/50 between stocks and bonds, and the stock market performed well, the portfolio's asset allocation could shift to 60/40. This shift can expose investors to more risk than they intended or may not meet their goals.

Rebalancing involves selling assets that have performed well and buying assets that have underperformed to bring the portfolio back to its original target allocation. This disciplined approach ensures that investors stay on track and avoid taking on unintended risks. Rebalancing is typically done periodically, such as annually or quarterly.

Rebalancing is the process of realigning the weightings of a portfolio of assets to maintain a desired risk level and investment strategy. This involves periodically buying or selling assets to return the portfolio to its target asset allocation. For example, if a portfolio's target is 60% stocks and 40% bonds, but market fluctuations shift this to 70% stocks and 30% bonds, rebalancing would involve selling some stocks and buying bonds to restore the original allocation. Rebalancing helps manage risk, maintain discipline, and ensure that the portfolio stays aligned with an investor's long-term goals.