Rebalancing
| Rebalancing a portfolio of assets is the act of acquiring or selling assets on a regular basis to maintain a specified level of asset distribution and risk. This process can be used to maintain a desired level of risk or return for the portfolio, or to take advantage of market opportunities. There are a number of reasons why an investor might choose to rebalance their portfolio. For example, if the original asset allocation was based on a specific goal, such as retirement, and the goal has been met, the portfolio may need to be rebalanced to reflect the new circumstances. Or, if the market conditions have changed, rebalancing may be necessary to maintain the desired level of risk. There are a number of different ways to rebalance a portfolio. One common method is to sell assets that have increased in value and use the proceeds to purchase assets that have declined in value. This can help to maintain the original asset allocation and reduce the overall risk of the portfolio. Another method of rebalancing is to periodically sell a fixed percentage of all assets and use the proceeds to purchase other assets. This approach can be used to gradually shift the asset allocation over time. Rebalancing a portfolio can be a complex process, and there are a number of factors to consider. However, it can be a valuable tool for managing risk and ensuring that a portfolio is well-positioned to meet the investor's goals. |
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