Groundlearn / Glossary / Rebalancing
Rebalancing
A CFA term, defined in plain English with the distinction examiners test.
What it means
Trading back to target weights after market moves have shifted them.
The exam angle
Mechanically it sells what rose and buys what fell. Calendar and percentage-band rules trade off transaction costs against drift.
Where it appears in the syllabus
- Asset AllocationCFA Level III · exam weight 15–20% · Capital market expectations, allocation principles, real-world constraints.
- Portfolio ConstructionCFA Level I · exam weight 8–12% · Risk and return, the CAPM, IPS construction, behavioural biases.
Related terms
- Efficient frontierThe set of portfolios offering the highest expected return for each level of risk.
- Strategic asset allocationThe long-run target mix of asset classes, set from the investor’s objectives and constraints.
- Currency hedgingUsing forwards, futures or options to reduce a portfolio’s exposure to exchange rate movements on foreign assets.
- ImmunisationStructuring a bond portfolio so that price and reinvestment effects cancel, locking in a return over a horizon.
- Liability-driven investingManaging a portfolio against the liabilities it must fund rather than against a market index.
- Reinvestment riskThe risk that coupons and principal must be reinvested at a lower rate than expected.
Educational content only. This is not financial, investment, legal or regulatory advice. Check the official curriculum for your own exam before relying on any definition here.
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