Rebalancing is the unglamorous maintenance that keeps a portfolio aligned with its plan. Left alone, a portfolio drifts as markets move, usually toward more risk than you intended, and rebalancing is the discipline of periodically pulling it back to your target mix.
Suppose you set a target mix of stocks and bonds. When stocks rise faster than bonds, they grow to a larger share of the portfolio than you planned, quietly increasing your risk exposure. After a long run-up, an investor can be holding far more in stocks, and far more risk, than they intended, right when it matters most. Drift is silent, and it tends to push toward risk at the worst times.
Rebalancing restores the target allocation by trimming what has grown overweight and adding to what has shrunk. Mechanically, this means selling some of what has risen and buying some of what has lagged, a disciplined version of buy low, sell high, done by rule rather than emotion. It also keeps your risk level where you decided it should be, rather than where the market drifted it.
Rebalancing can be triggered on a schedule, say annually, or when the mix drifts beyond a set threshold. Taxes and costs matter, so it is often done thoughtfully, using new contributions or tax-advantaged accounts where possible. The discipline is the point: rebalancing enforces selling high and buying low precisely when emotion urges the opposite, which is part of why steady, planful investing tends to serve people well.
Drift adds risk. Rebalancing takes it back out.
This is general educational information, not personalized investment, tax, or legal advice. Consult a qualified professional about your situation.