GlossaryIntermediate
Portfolio Rebalancing
Periodically adjusting holdings back toward a target allocation as prices drift.
Portfolio rebalancing is the practice of periodically buying or selling holdings to bring an actual portfolio allocation back in line with a previously chosen target, correcting for how different assets' performance causes the allocation to drift over time.
This is a general portfolio-management discipline, not specific to crypto, though crypto's volatility can mean more frequent drift from target percentages than in less volatile asset classes.
Examples
- A portfolio might be rebalanced quarterly to correct for drift caused by differing asset performance.
- Rebalancing generally means selling some of an outperforming asset and buying more of an underperforming one.