Rebalancing

Rebalancing – What is it, and why is it useful?

Rebalancing means restoring the originally defined structure within a portfolio – for example, a portfolio consisting of several ETFs. Due to the different performance of individual positions, the asset allocation of the portfolio can drift away from its initial weights.

An example:

An ETF portfolio is set up so that two-thirds of the money is invested in an ETF tracking the MSCI World Index and one-third in an ETF tracking the MSCI Emerging Markets Index. If the allocation shifts to three-quarters and one-quarter, targeted purchases of the underweighted or sales of the overweighted position can restore the original distribution of the ETF portfolio – and thus the desired risk-return profile. For private investors, rebalancing can be effectively implemented through regular deposits.

If you don’t want to take care of rebalancing in your ETF strategy yourself, you can take a look at Scalable Wealth. Our digital wealth management not only takes care of the initial investment according to your investment strategy but also continuously monitors your portfolio.