Over time, an investor’s portfolio allocations to different assets and asset classes might shift due to differences in the type and amount of returns. Also, after some time, an investor’s strategy might change. In such cases, it is necessary to make trades to ensure that the portfolio remains aligned with the investment strategy and to apply any changes in the investment strategy.
Rebalancing a portfolio is the act of making trades to ensure the portfolio remains aligned with the strategy and that any changes in the strategy are applied to the portfolio.
