Rebalancing is the process of realigning weightings of various assets in the portfolio. Rebalancing entails periodically buying or selling assets in a portfolio to maintain the desired level of asset allocation or risk. Let us take an example here. Say the original target asset allocation was 50% stocks and 50% bonds. If the index boomed and stocks performed well during the period, it could have increased the stock weighting in the portfolio to 70%. Rebalancing calls upon the portfolio manager to sell some stocks and buy bonds to get the portfolio back 50/50 allocation.