Rebalancing your portfolio: What is it and when should you do it?

You invest money to make returns and see your wealth grow. With a time frame and a goal in mind, your attitude to risk (as well as your capacity for loss) will help determine the balance of your portfolio.

Your portfolio isn’t a static thing though. Regular rebalancing helps to maintain your original mix and keep you on track.

Here’s what we at Expert Wealth can do to help manage your investments and see you achieve your long-term investment goals:

An investment philosophy designed to meet your goals

A successful investment strategy is one that you understand, have faith in, and that stands a good chance of meeting your goals. It should also allow you to sleep soundly at night.

Our three core principles are designed to help you achieve just that. We believe that:

  • The markets work well – Markets are fair, and prices reflect all the available information at any one time. Playing the markets doesn’t work.
  • Risk and reward go hand in hand – There are no free lunches in investment. If you want a higher rate of return, you’ll need to take more risk.
  • Diversification is key – There are distinct types of investment and making use of them can make your journey smoother. We diversify your portfolio across individual securities, asset class, and geography to spread risk.

Building the right portfolio for you

Assembling the best portfolio for you is central to our process. By getting to know you, we can understand your attitude to risk and capacity for loss.

Investments are split across different asset classes – cash, bonds, equities, property. Each has its own level of risk. The asset allocation we choose for you will be based on our understanding of your risk profile and designed to give you the strongest chance of achieving your investment goals.

Most importantly a portfolio must be suitable for you and your circumstances. This will likely mean a mixture of equities, highly diversified to spread risk, and a balance (where necessary) created with low-risk bonds.

Diversification spreads risk

Diversification is the investment equivalent of not putting all your eggs in one basket.

Spreading your investment across asset classes, across different industries and sectors, and in various parts of the world spreads the risk. If one area suffers a loss, it is hoped that the loss will be counteracted by a market rise in another area.

You have your views on the level of risk you are willing to take. At Expert Wealth, we have ours too. While we expect risk and reward to go hand in hand, there are some “bad” risks that we are not willing to take with your money.

Managing risk is done through:

  • Product due diligence – Understanding and constantly reviewing the products we recommend mitigates the risk of product surprises.
  • Ongoing governance – Regular Investment Committee meetings form part of a robust review process of the risks and investment factors that could impact your portfolio.
  • Managing risk tightly – We use insight, diligence, and discipline to manage the risks we are willing to take, eliminating all others.

Rebalancing your portfolio

Although the general trend of the markets is an upward one (see the FTSE 100 since 1990), the markets are in constant flux. Therefore, an investment should only ever be a long-term proposition.

Source: London Stock Exchange

Having put the right long-term portfolio in place for you, it is important to focus on your long-term goals and not stray too far from this mix.

Your investments don’t need to change – this isn’t about chasing the market – but as prices rise and fall your “ideal” mix might become unbalanced.

Through regular reviews, we keep track of your portfolio mix, rebalancing it when necessary to ensure it always aligns with your risk profile.

Rebalancing could involve the unemotional sale of assets that have done well while reinvesting in assets that have done less well. The hope is that this results in a beneficial “rebalancing” return.

Our chartered financial planners have the expertise and experience to track your investments and manage risk to allow you to sleep soundly at night, knowing your investments have the best possible chance of achieving your goals.

Get in touch

Keeping track of a diversified investment portfolio can be tricky. We can help put the right portfolio together for you, aligning your attitude to risk with your aspirations. We’ll then keep regular track of your portfolio to ensure it remains balanced, making risk-based changes when needed.

Please get in touch if you’d like to discuss your current investments or if you’re investing for the first time.

Please note

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Levels, bases of, and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.


About the Author

Dom is a qualified and experienced Chartered Financial Planner (CII) and Chartered Wealth Manager CFP (CISI) and a Registered Life Planner (Kinder Institute) with over 30 years experience. His work primarily focuses on retirement income planning, helping clients to maintain financial dignity and independence in retirement. Read more from Dominic...
This article is distributed for educational purposes and should not be considered investment advice or an offer of any product for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but is not guaranteed. Past performance is not indicative of future results and no representation is made that the stated results will be replicated.
This is my first venture into any kind of personal finance. Your candour and patience with me are very much appreciated. A.S. (London)

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