Avoiding drifting off
Even the most carefully built portfolio will not stay perfectly balanced forever. Markets move at different speeds, and over time your mix of investments can gradually shift away from your original plan. This can often happen without you noticing. This gradual change is called portfolio drift.
What is portfolio drift?
Portfolio drift happens when certain investments grow faster than others. Over time, those faster growing assets take up a larger share of your portfolio, while slower growing ones shrink proportionately. This shift can quietly change the level of risk you are taking and move you away from the investment goals you originally set.
What is rebalancing?
Rebalancing is about controlling risk, not predicting markets.
This is done by selling a portion of investments that have grown too large in your portfolio and using the proceeds to buy more of those that have become proportionately smaller.
The goal is not to chase performance, it is to bring your portfolio back to the target mix you started with, so the level of risk remains in line with that which you originally chose.
