How it works
When holding a combination of assets that move differently, such as stocks and bonds, price movements in each gradually cause the actual mix to drift away from the original asset allocation (see related page). Rebalancing addresses this by selling part of the assets whose weight has risen and buying more of those whose weight has fallen, bringing the mix back toward the target.
Difference from dollar-cost averaging
Dollar-cost averaging (see related page) involves investing a fixed amount at regular intervals, whereas rebalancing adjusts the allocation of assets you already hold — this is the key difference between the two.