Rebalancing refers to the process of adjusting the asset allocation of a portfolio to bring it back to the desired or target levels specified in an investment plan. Over time, the values of different assets within a portfolio can change, leading to a deviation from the intended asset allocation. Rebalancing involves buying or selling assets within the portfolio to restore the original allocation. This process typically involves selling assets that have performed well and buying assets that have underperformed. The goal of rebalancing is to maintain the desired risk level and ensure that the portfolio aligns with the investor’s long-term investment objectives.
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