General

Rebalancing

The process of realigning the weightings of assets in a portfolio to maintain a desired allocation. If an investor targets 60% stocks and 40% bonds, a stock rally might push the mix to 70/30, requiring the sale of stocks and purchase of bonds to restore balance. Institutional rebalancing flows, particularly at quarter-end and year-end, can create predictable market movements that other traders attempt to front-run.

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