Portfolio rebalancing is an essential component of the investment management process; therefore, it is crucial to make sure that your portfolio is still compliant with your investment goals and risk tolerance. At Teamventures we perceive that markets are never static and investor needs change over time that is why we have a proactive policy of altering portfolios that we do on regular basis to make sure we are optimizing the performance of the portfolios and managing the risks.
The Importance of Rebalancing:
Rebalancing the portfolio is very significant for several reasons. First and foremost, it plays a tremendous role in risk management by making sure that your holdings are not narrowly focused in a particular asset category. Furthermore, it may assist in generating higher returns through sale of the value bloated asset and investing the proceed in undervalued assets. Lastly, rebalancing is useful for maintaining the discipline and preventing the gambler syndrome caused by investors by systematically adjusting the portfolio to the investment plan.
How Rebalancing Works:
At Teamventures we use disciplined portfolio reallocation, which is a methodical and systematic approach to portfolio rebalancing. We begin by setting a target asset allocation using your goals, risk tolerance, and time frame as the reference. Next, we will track the performance of your portfolio on an ongoing basis, conducting a regular review and comparing the performance to your benchmark allocation. When drifts from the target allocation go past predetermined thresholds, we make adjustments by rebalancing the portfolio to align it.
Strategies for Rebalancing:
There are multiple forms of portfolio rebalancing methods like calendar-based, threshold-based and opportunistic rebalancing. The calendar-based rebalancing includes rebalancing your portfolio on a regular basis, e.g. quarterly or annually. With threshold-based rebalancing, your portfolio gets rebalanced whenever deviations from the optimal allocation are above a specific figure, usually 5% or 10%. In opportunistic rebalancing, timing is used to take advantage of market movements or tax concerns to rebalance a portfolio when it pays off.
Benefits of Rebalancing:
Portfolio rebalancing provides lots of benefits such as risk management, return optimization, and discipline sustainment. Through the regular rebalance of your portfolio to the desired allocation, the risk of being overweight in any asset class or market sector is reduced. In addition, there is the possibility of accruing higher returns through the system of buying low and selling high. In this regard, rebalancing is particularly useful since it helps disciplined decision-making and prevents impulsivity by following a systematic approach to portfolio management.
At Teamventures, it’s our mission to ensure that you effectively maintain your performance with prudent portfolio rebalancing. In order to do that, our experienced investment professionals will be in constant discussion with you to determine a target asset allocation and further will deploy a rebalancing strategy that meets your objectives and risk tolerance. Whether you adjust your portfolio to respond to market changes or you take advantage of tax-efficient rebalancing procedures, we are here to help you master the complexities of the investment management process with confidence.