What is Rebalancing?
Rebalancing is the process of realigning your portfolio weights to your target allocation. As prices change, allocations drift from their original percentages.
When to Rebalance
- On a schedule (monthly, quarterly)
- When allocations drift beyond thresholds
- After major market moves
In DeFi
AMM liquidity positions automatically rebalance, which causes impermanent loss but maintains the pool ratio.