Rebalancing — Mutual Fund Term Explained

Periodically restoring your portfolio to its target asset allocation by selling outperformers and buying underperformers.

Rebalancing means bringing your portfolio back to its target asset allocation. If your target is 70% equity / 30% debt and equity has risen to 80%, you sell some equity and buy more debt.

Rebalancing enforces discipline — systematically selling what is expensive and buying what is cheaper.

Related terms

• Asset Allocation — How you distribute investments across asset classes — equity, debt, gold. The single biggest factor in long-term portfolio returns and risk.
• STP (Systematic Transfer Plan) — Automatically transfer a fixed amount from one fund (liquid/debt) to another (equity) at regular intervals. Used to deploy a lump sum gradually.

Browse the full mutual fund glossary, or see this concept in action in the fund screener.