What changes the structure?
Rebalancing changes the composition of a portfolio to return it to preselected weights or ranges. The structure moves because prices, distributions and new contributions move differently. The rule may rely on calendar reviews or on the size of the deviation; it should fit the investor’s goals and constraints.
Example
If stocks rise faster than bonds, their share of the portfolio may become higher than planned. The investor can restore the structure by selling part of the stocks or directing new money to another part of the portfolio. The choice depends on costs, operational access and the particular situation.
Limitations
Rebalancing is not a guaranteed way to increase return and does not require guessing the next market reversal. Its main purpose is to maintain a consistent level of risk. Excessively frequent transactions can increase costs. Restoring old weights without reviewing the goal is not always sensible: a changed horizon or financial circumstances may require a new target structure. Related reading: [rebalancing and behavior](/guides/rebalancing-and-behavior/), [asset allocation](/glossary/raspredelenie-aktivov/) and [tax records](/guides/tax-records-basics/).