Rebalancing
Rebalancing is a financial term used to describe the process of realigning the weightings of a portfolio of assets. It is a strategy used to maintain a predetermined level of asset allocation, and is often used to maintain a desired level of risk. Rebalancing involves periodically buying or selling assets in a portfolio to maintain an original desired level of asset allocation. This process is used to ensure that the portfolio remains in line with the investor’s goals and objectives.
History of Rebalancing
The concept of rebalancing has been around for centuries, with the earliest recorded use of the term dating back to the 16th century. The term was first used in the context of financial investments in the early 20th century, when investors began to recognize the importance of maintaining a balanced portfolio. Since then, rebalancing has become an important part of portfolio management, and is used by investors to ensure that their portfolios remain in line with their goals and objectives.
Comparison Table
| Strategy | Risk Level | Return Potential |
|---|---|---|
| Rebalancing | Low | Moderate |
| Aggressive Investing | High | High |
| Passive Investing | Low | Low |
Summary
Rebalancing is an important part of portfolio management, and is used to ensure that a portfolio remains in line with an investor’s goals and objectives. Rebalancing involves periodically buying or selling assets in a portfolio to maintain an original desired level of asset allocation. This process helps to reduce risk and maintain a desired level of return potential. For more information about rebalancing, investors can visit websites such as Investopedia, The Balance, and Morningstar.
See Also
- Asset Allocation
- Portfolio Management
- Risk Management
- Investment Strategies
- Diversification
- Portfolio Rebalancing
- Portfolio Optimization
- Risk Tolerance
- Asset Classes
- Investment Risk
