Asset Allocation Rebalancing

Asset allocation is the division of a portfolio across asset classes (stocks, bonds, alternatives). Rebalancing is the process of periodically adjusting holdings to maintain target allocations. Example: Target 60% stocks, 40% bonds. After a bull market, stocks grow to 70%. Rebalancing: sell some stocks, buy bonds, return to 60/40. This forces a disciplined "buy low, sell high" approach.