If shares rise, your portfolio quietly becomes riskier than you planned.
Direct answer
Rebalancing means adjusting your investments back to your target mix after price changes have moved it. You can do it on a schedule, such as once a year, or when an asset drifts beyond a set range. You can also rebalance by directing new money to the underweight asset.
Example
You targeted 60 percent shares and 40 percent bonds. After a strong year, shares are 70 percent. Rebalancing means shifting some back toward bonds.
Approaches
- Time-based: review yearly.
- Threshold-based: act when a holding drifts a set amount.
- Cash-flow: use new contributions.
Watch for
- Trading costs and taxes.
- Doing it so often that costs outweigh benefits.
Where Teyro fits
Teyro's How to Understand Investment Risk course turns this into short lessons you can play in a few minutes a day. It has 50 lessons, and you can start free.
The bottom line
Rebalancing keeps your risk where you chose it. This is general education, not advice.
This is general education, not personal financial advice.
