# Rebalancing Rebalancing allows managers to change their BSKT's token allocation. This is the core tool for executing an investment strategy: rotating into new positions, adjusting weights, or responding to market conditions. ## How Rebalancing Works Rebalancing is a two-phase process: ### Phase 1: Initialize The basket's current tokens are sold into an intermediate asset (WETH). This liquidates the existing allocation in preparation for the new one. ### Phase 2: Rebalance The intermediate WETH is used to purchase the new tokens according to the updated allocation weights. The basket now holds the new portfolio. Both phases happen as separate on-chain transactions. The manager must complete both phases for the rebalance to finish. ## When to Rebalance Common reasons to rebalance: * **Conviction change:** You've identified better opportunities and want to rotate the portfolio * **Risk management:** Market conditions have changed and you want to reduce exposure to certain assets * **Weight drift:** Token price movements have caused the actual weights to diverge significantly from your target weights * **New tokens:** You want to add tokens that weren't in the original allocation ## MEV Protection Like all BSKT operations, rebalancing is MEV-protected. The protocol's backend computes optimal swap routes and signs the transaction data before it goes on-chain. This prevents front-running and ensures better execution prices for the swaps involved. ## Important Considerations * **Slippage:** Large rebalances involving low-liquidity tokens may experience slippage. The protocol accounts for this automatically, but be mindful of the size of your swaps relative to available liquidity. * **Gas costs:** Each rebalance requires gas on whichever network the BSKT is deployed on. More tokens in the basket means more swaps and higher gas costs. * **Investor impact:** Rebalancing changes the composition of every LP token holder's position. Rebalance thoughtfully and consider publishing manager notes explaining your rationale. * **Frequency:** There's no limit on how often you can rebalance, but frequent rebalancing incurs gas costs and may erode investor confidence if changes appear erratic. --- # Agent Instructions: Querying This Documentation If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question. Perform an HTTP GET request on the current page URL with the `ask` query parameter: ``` GET https://docs.alvara.xyz/fund-managers/rebalancing.md?ask= ``` The question should be specific, self-contained, and written in natural language. The response will contain a direct answer to the question and relevant excerpts and sources from the documentation. Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.