INSIGHTS WITH EVALESCO

Benefits of quarterly rebalancing

TOPICS DISCUSSED

Quarterly rebalancing
Maintaining portfolios
Managing risk

Rebalancing is a simple but often forgotten tool for managing investment portfolios. It involves periodically buying or selling assets in a portfolio to maintain a desired level of asset allocation or risk.

A lot of work goes into selecting the relevant split of investment types, such as shares, property, bonds, cash, for your portfolio. That becomes your target allocation. Which may change as your strategy or risk tolerance changes but not just because investment markets or values change.

Rebalancing is great for managing the risk in your portfolio and making sure it is aligned with the risk you planned to take on. A key benefit is you’re always selling when values have gone up (sometime only relatively speaking) and buying when values have gone down. That’s always a good idea.

It’s impossible to get the timing of that perfect, so you buy at the lowest and sell at the highest. Even though many people will tell you they can do it. But let’s work toward progress not perfection.

Rebalancing at set intervals, such as quarterly, is a helpful way of removing the desire to try and pick the right time. You plan in advance and execute it at the agreed time.
Over the long term it adds a lot to managing risk, helping to stick to your plan and may improve results.

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