REBALANCING

The process of buying or selling securities over time in order to maintain your desired asset allocation. For example, if your target allocation is 60 percent stocks, 20 percent bonds and 20 percent cash, and the stock market has performed particularly well over the past year, your allocation may now have shifted to 70 percent stocks, 10 percent bonds and 20 percent cash.

To rebalance your portfolio, you could sell some of your stocks and reinvest the proceeds in bonds, or invest new money in bonds to bring the portfolio back to the original balance.

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