Astute investors periodically re-balance their portfolios. Certain holdings will grow while others will shrink, as a portion of a portfolio. When this happens, action should be taken to bring your asset allocation back into line.
Suppose, for example, your basic allocation calls for 20% to be held in large-cap growth stocks and 20% in large-cap value stocks. After 1998-1999, when large-cap growth stocks led the way, your portfolio might have tilted to 25% in large-cap growth and 15% in large-cap value. A re-balancing strategy might have called for you to sell growth stocks and buy value stocks, bringing both allocations back to 20% of your portfolio. You would have been selling high and buying low. Such a move would have paid off since then, as value stocks have outperformed growth stocks.
