• Rebalancing is the act of adjusting a portfolio’s altered asset allocation to match the original allocation determined by the investor’s risk and reward profile.

  • There are several types of rebalancing strategies, such as calendar, permanent-mix and portfolio-insurance.
  • Calendar rebalancing is the least expensive, but does not respond to market fluctuations.
  • Constant mixing strategy is flexible, but more costly than calendar rebalancing.
  • Rebalancing costs may include transaction fees, unintended exposure to higher risk, and selling assets as they rise in value.