One topic I see referenced quite often in personal finance books – especially books focused on retirement – is the idea of rebalancing. It’s often discussed as though the writer assumes that the reader knows what rebalancing is, but given the confusion I sometimes see in reader emails, I don’t think the idea of rebalancing is often clear to people.

So, let’s walk step by step through the story of rebalancing. I’m going to look at this with regards to retirement savings, but it’s true for any kind of investments.

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