Re-Balancing

RebalanceRe-balancing is the process of restoring a portfolio to its original asset allocations and risk profile. It is an ongoing process because each asset class within the portfolio is likely to shrink or grow by a different percentage over time — altering the risk (and expected return) — of the portfolio. In addition, re-balancing provides practice for resisting the temptation to second guess your strategy during the inevitable difficult periods. The time to be a buyer, instead of a panicked seller, is when an asset class is performing poorly. Re-balancing in good times, when markets are rising, enables you to develop the skills and the discipline to also do it in tough times.