When you fund your account at InvestEngine, your money is used to buy ETFs in the proportions that you have agreed to as part of the on boarding process.
Over time, various securities and asset classes within your portfolio will earn different returns due to market movements. This has the effect of altering your portfolio’s asset allocation.
Rebalancing is the important process of buying and selling portions of your portfolio in order to set the weight of each asset class back to its original state.
Essentially, rebalancing will help you stick to your investing plan regardless of what the markets do.
Your portfolio is monitored continuously. Each ETF position within your portfolio has tolerance range in which the value of that position can go up or down; if the value of the ETF breaches this range, then a corrective buy or sell order may be triggered. Corrective actions are taken as long as it makes sense to do so with due regard to the overall portfolio.
Rebalancing restores portfolio weightings to their target allocations by selling assets that have appreciated and adding to those that have declined. Importantly, it can help reduce risk.
We will also rebalance your portfolio if your investment strategy or tolerance for risk changes.