Rebalancing: the boring habit that controls risk
5 chapters·16 min·action plan·mastery check
Chapter 1 of 5
The idea
Do nothing for five good years and your 'medium risk' portfolio can quietly become high risk.
Drift
If you start 60% shares and 40% bonds, and shares grow faster, you might end up 75/25. You now take more risk than you signed up for. Rebalancing means selling a little of what grew and buying what lagged, to get back to your target.
Predict first
You start at 60% shares and 40% bonds with $10,000. Shares rise 30% and bonds 2%. What's your new mix?
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