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Portfolio Rebalancing Explained: What It Is, Why It Matters, and How It Works Investing is often described as a process of choosing the right investments and then staying invested. That is broadly true, but there is another part of long-term investing that is easy to overlook: maintaining the portfolio you actually intended to own. Over time, investments do not grow at the same rate. If stocks rise much faster than bonds, for example, stocks will gradually make up a larger percentage of your portfolio. You may still own the same investments, but the portfolio can become riskier than you originally planned. Portfolio rebalancing is the process of bringing your portfolio back toward its intended asset allocation after market movements or other changes cause the percentages to drift. For example, suppose you initially choose a portfolio containing 70% stocks and 30% bonds. After several years of strong stock-market performance, it becomes 80% stocks and 20% bonds. If 70/30 is sti...