Portfolio Rebalancing

Portfolio rebalancing is periodically adjusting your holdings back to their intended target weights after market moves have shifted them. Because assets grow at different rates, an untouched portfolio drifts toward whatever performed best, concentrating risk in exactly the assets that have already run up.

For example, suppose you target 50% BTC, 30% ETH, and 20% stablecoins. After a strong bitcoin rally, the mix might drift to 65% BTC, 22% ETH, 13% stablecoins. Rebalancing means selling some BTC and buying ETH and stablecoins until the 50/30/20 split is restored. Mechanically, this sells what has outperformed and buys what has lagged.

Rebalancing can run on a calendar (monthly, quarterly) or on thresholds (whenever an allocation drifts more than, say, 5 points from target). It enforces a modest sell-high, buy-low discipline without requiring forecasts, and it keeps risk aligned with what you originally chose. The costs are trading fees and, in many jurisdictions, taxable events on each sale, so frequency involves a trade-off. A common misconception is that rebalancing maximizes returns; in a sustained one-way bull market it trims the winner early, and its purpose is controlling risk and behavior, not beating buy-and-hold.