Rebalancing: The "Tuning" of Your Investment Engine

What is Rebalancing?

Rebalancing is the process of selling a bit of what has grown too much and buying more of what has lagged behind to bring your "recipe" back to its original balance.

Why Do It? (Buying Low, Selling High)

Rebalancing forces you to do the one thing every investor wants to do but finds emotionally difficult:

• Sell High: You sell a portion of your "winning" stocks when they are expensive.

• Buy Low: You move that money into "laggards" (like Gold or Bonds) while they are relatively cheaper.

It’s a mathematical way to lock in your profits and lower your risk without having to guess what the market will do next.

When Should You Rebalance?

You don't need to do this every week. There are two common strategies:

• The Calendar Rule: Check your portfolio once a year (many people choose March to align with the financial year-end).

• The "5% Rule": Rebalance only if an asset class moves more than 5% away from your target. If your 60% stock allocation becomes 65%, it’s time for a tune-up.