Apart from asset allocation decision, financial experts around the world are advocating periodic portfolio rebalancing to bring your investments portfolio that has deviated from the target asset allocation back in line. In short, portfolio rebalancing is the action of selling of high performing investments to buy lower performing investments, with the condition that the fundamentals of lower performing investments are still intact. While this logic deviates from normal human psycology, what portfolio rebalancing is doing is basically to sell high and buy low. With periodic portfolio adjustments, we can take advantage of the system to take profit devoid of our emotions in making investment decisions.
