Rebalancing

Why a portfolio drifts away from its target mix, a real 10-year example of drift, the main ways to rebalance, and how to do it without big tax bills.

Portfolios drift

You pick a mix, say 70% stocks and 30% bonds, because it matches your goals and your comfort with risk. Then the market moves. If stocks rally, they grow into a bigger share of your portfolio. Your risk has quietly risen without you making a single decision. Rebalancing is the act of bringing the mix back to your target.

Unlock all of Investing School

The rest of this lesson, its chart examples and quiz are part of Investing School. Start free with Stock Market Fundamentals and the first lesson in every category.