Rebalancing
Moving your investments back to the mix of stocks, bonds and cash you chose, after market moves have pushed it off target.
Different investments grow at different speeds, so your mix drifts over time. If stocks rise faster than bonds, you end up holding more risk than you planned. Rebalancing sells some of what is over target and buys what is under, or sends new money to whatever is under target.
Many people rebalance once a year, or when a holding drifts more than about 5 percentage points. Trades inside a 401(k) or IRA are not taxed. In a regular brokerage account, selling at a gain can mean a tax bill.
Example
A $24,000 portfolio that should be 70% stocks holds $18,000 in stocks. The target is $24,000 × 70% = $16,800, so you move $18,000 − $16,800 = $1,200 to bonds.