A tool designed to assist investors in realigning their asset allocation to a target portfolio. This typically involves specifying current holdings and desired proportions for each asset class (e.g., stocks, bonds, real estate). The tool then calculates the necessary adjustments, indicating which assets to buy or sell to restore the portfolio to its target allocation.
Maintaining a desired asset allocation is crucial for managing investment risk and achieving long-term financial goals. Periodic realignment helps prevent portfolio drift, which occurs when market fluctuations cause asset proportions to deviate from the initial strategy. This drift can lead to unintended risk exposure. Historically, disciplined adherence to a target allocation has been shown to contribute to improved portfolio performance by systematically buying low and selling high.
