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Rebalancing

Adjusting a portfolio back to its target mix after market moves have shifted it.

ETFs & PortfolioBeginner

Definition

If stocks rally, they become a bigger share of the portfolio than planned. Rebalancing sells some of the winners and buys the laggards to restore the original allocation, which keeps risk in line with your plan.

Watch out for

Rebalancing can trigger taxes in a non-registered account. Some investors rebalance by directing new money instead.

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