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Today, we are talking about a topic that should definitely not be forgotten when it comes to long-term investment goals. Maybe it's a bit boring, but as we all know, the most unattractive things are often very lucrative. Therefore, stay tuned to learn more about the topic in an exciting way! 🙂
After all, in addition to looking for new investment opportunities and analysing the markets, it is very important to keep your Regularly review the portfolio to ensure thatwhether it is still contemporary is. The regular saving in securities in your portfolio is carried out according to a certain pattern or investment strategy defined by you. You follow the principles and risk strategies you have defined.
No matter what you invest in, be it ETFs, shares or other securities, a Review of your portfolio should be done regularly. Why you should do this? Market changes lead to shifts in your portfolio and thus become a Deviating from your defined portfolio strategy.
The associated Risk can change. This adjustment of the portfolio is also called rebalancing. You can find out exactly what it is and why it is important for your portfolio in the article "Rebalancing explained".
Rebalancing explains itself quite quickly. It is a Principle from financial theorywhich states that the Portfolio regularly to its original investment strategy or its original relationship between different positions. reviewed and adapted should be.
In concrete terms, rebalancing means that a Portfolio60% of which consists of shares and 40% of which consists of other alternative investment options. change over time can. A strong increase in share prices causes the share ratio to shoot up quickly to over 60%. With an increase in the share quota, there is also an increase in the deliberately chosen risk in the portfolio. An adjustment in the sense of rebalancing is necessary in this case.
So the higher the equity ratio the more likely it is that the Portfolio fluctuations and possibilities of (mostly short-term) loss. Rebalancing is thus explained by the Balancing of fluctuations in the previously defined position sizes of individual portfolio components.
The Risk profile In the event of an imbalance arising, the be restoredby selling rising shares and buying other investment products instead. In addition to buying or selling shares from the portfolio, it would also be possible to deposit a cash position to restore the balance or the originally chosen strategy.
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This question depends very much on your personal investment intentions. If you only want to make short-term profits, then rebalancing probably does not play a major role for you. However, if you have a long-term investment horizon with as consistent risk profile then rebalancing from time to time is highly recommended.
In addition to changing the risk profile, rebalancing can also be a means, when markets have changed, to Include current trends and developments in your own strategy. If, for example, you would like to invest more in the Swiss market (to find out which options are available, see here) and weight it more heavily in your portfolio or use cryptocurrencies (for example, via the provider Bitpanda), then your risk profile as well as your quota of the different Asset classes. Also your personal investment behaviour is therefore decisive for whether rebalancing is needed for a successful portfolio.
When one speaks of Disadvantages of rebalancing, then the most important thing is certainly the Cost factor to mention. The sale of old securities and the purchase of new ones, attracts Transaction fees with it. Furthermore, in the case of Additional taxes on capital gains accrue.
When deciding whether or not to carry out rebalancing, the transaction costs and therefore the Cost-benefit ratio always be in reasonable proportion.
At this point it should be mentioned that certain Robo-Advisor already a Rebalancing included in the price structure have. A rebalancing is thus carried out automatically and without further costs by the Robo-Advisort.
Rebalancing is a good way to increase your Regularly review your risk profile and investment strategy over time.. In this way, it is possible to respond to changes in the market and to adapt and maintain an investment strategy defined at the beginning by regularly reviewing it with the principle of rebalancing.
Basically, the principle of rebalancing is a tool that is above all makes sense in the case of very long-term (or passive) portfolios. .
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