Rebalancing investments

Rebalancing is the reallocation of investments in order to restore a target asset allocation. This means there is no buy -and-hold.

If an asset allocation is realized, it will vary over time due to different performance of individual asset classes from the original state. Then, the target allocation needs to be recovered by reallocation of funds between individual asset classes in the portfolio. However, practical obstacles are transaction costs and tax advantages and disadvantages of such a shift ( gains must be taxed, losses can be deducted ).

With an active investment strategy switches will be made when new information becomes public ( eg via ex ante interest rate or the composition of the underlying index such as DAX) or shift in the relative shares by foreign exchange gains (ex post, such B. 40/60-Strategie ).