Rebalancing
Rebalancing is the process of adjusting your investments back to your target mix after market movements have changed it.
What it means
Rebalancing is the process of adjusting your investments back to your target mix after market movements have changed it. This usually means selling some investments that have grown strongly and buying more of those that now make up a smaller part of your portfolio.
You have £1,000 invested £800 shares (80%), £200 bonds. After a strong year for shares your portfolio becomes £1,400 shares (85%) and £250 bonds (15%). You rebalance back to 80% shares, 20% bonds.
Why it matters
Rebalancing helps keep your investment risk aligned with the level you originally chose.
Many investors rebalance once or twice a year rather than constantly.
Why not just leave my portfolio alone?
Without rebalancing, your portfolio can gradually become riskier or more cautious than you intended.