GLOSSARY · INVESTING

Rebalancing

Bringing a portfolio back to its target mix after market moves have pushed it away, by selling some of what has grown and buying what has lagged, or by steering new money and withdrawals. It keeps risk at the level the owner chose rather than at whatever the markets left behind. It can be done on a schedule, when the mix drifts past a set band, or both.

Also called: rebalance, portfolio rebalancing

FORMULA

Drift = current share of an asset − target share

COMPUTE IT WITH YOUR NUMBERS

Portfolio rebalancing →How much of each fund to buy/sell to hit target?Asset allocation by age & risk →What stock/bond/international mix should I hold?

LEARN IT PROPERLY

CHAPTER · INVESTMENT FOUNDATIONS · FOUNDATIONSFinding the Level of Risk You Can Live With CHAPTER · STOCKS & BONDS MASTERY · STRATEGIESAsset Allocation: Choosing Your Mix of Stocks and Bonds

SOURCES

Rebalancing. U.S. Securities and Exchange Commission, Investor.gov.
Topic No. 409, Capital gains and losses. Internal Revenue Service.

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