Rebalancing

Portfolio rebalancing is a reallocation of the weight of portfolio assets and is intended to systematically help sell high-priced asset classes for low-priced asset classes. It includes buying and selling existing assets either fully or partially from time to time to maintain the desired level of return and diversification. Rebalancing can be industry or sector-specific or in combination. The portfolio assets can be a mix of bonds, equity, and other stocks depending on the investor’s appetite for risk and return.

Portfolio rebalancing can be risk-based and depend on the investors’ circumstances and suitability. We believe you should check your asset allocation once a year to determine if you need to rebalance your asset mix or reconsider some of your specific investments. Generally those who are younger are advised to invest more aggressively, tapering to more secure investments as they grow older. It’s common for individuals approaching retirement to shift a portion of their investment portfolio to more secure income-producing investments, like bonds.

Rebalancing approaches can also include calendar-based and range-based rebalancing. Calendar-based rebalancing rebalances the portfolio to target weights on a periodic basis. Range-based rebalancing sets rebalancing thresholds or trigger points around target weights.