Rebalancing is the process of adjusting the weightage of your portfolio. It involves purchasing or selling of assets in your portfolio to maintain the original allocation.
For example, if your portfolio consists of ETF-A and ETF-B, both valued at $50 each. If the value of ETF-A increase to $100, while ETF-B increase to $60; a large amount of the value in your portfolio is tied to ETF-A. In the event when ETF-A experience a sudden downturn, your portfolio will suffer greater losses due to the association. By rebalancing, we allow you to redirect your portfolio back to your original allocation.
Rebalancing is fully automated with Smartly and will be updated regularly to ensure that your portfolio allocation does not drift more than 5%. This ensures that your portfolio remains diversified and lower your investment risk.
For example, if your original portfolio allocation was 50% stocks and 50% bonds. If the bonds performed well during the period and the value of the bonds is 70% of the portfolio value, while the value of the stocks is 30%; we will automatically rebalance by selling away your bonds and use the returns to purchase stocks to get the portfolio back to the original allocation of 50% each.