Portfolio tilting, or simply tilting, refers to the practice of making changes in the industries of a portfolio’s components or style weighting of such components in order to improve the performance of its parts and consequently its overall performance. For a portfolio of stocks, tilting or value tilting involves making a deviation (change) from the total stock market distribution percentages as previously defined. As a process, titling entails a sort of allocation and re-allocation of assets/ investments to grab more value and drive performance higher. For example, a portfolio manager may consider adding value stocks and small stocks (small caps), that are typically associated with higher risk, as means by which higher returns can be achieved in relation to respective components. The focus of tilters (investors who resort to tilting techniques), would be the long-term performance of small caps that also provide for growth opportunities.

On the other hand, rebalancing a portfolio (portfolio rebalance) is the process aiming to sell or buy assets (e.g., securities) that have impacted the value of the portfolio in order to restore their original weights and significance therein. By so doing, a portfolio manager can ensure that it will regain its asset allocation as per the originally set weights and percentages. This may also involve buying and selling shares in mutual funds, exchange-traded funds (ETFs) or other investments to bring a portfolio back to its originally planned asset allocation.

In short, tilting involves making certain changes to weightages within a portfolio with the aim of improving performance, while rebalance has to do with regaining the original, pre-defined balance given the changes sustained in the original weights and significance of components.