What is Portfolio Rebalancing?

The portfolio rebalancing is a method in which funds are invested proportionately in equity and debt to reduce the risk of loss and optimize the returns. Such asset allocation improves the status of portfolio and delivers lucrative gains on the funds invested by clients of advisors.

Why do Advisors need rebalancing?

The investors shows their interest only in deal with the advisors having potential to generate stable returns as the clients believes in consistent gains for a long period rather than a huge amount for a single time. This strategy has capability to fulfill the expectations of clients which ultimately proves beneficial for advisors.

Key Features-

• Proper Utilization of client’s investment.

• Sick portfolio even delivers fruitful returns.

• Rebalancing can be done at fixed interval or at percentage change.

• Diversified investment method is followed.

• More returns are generated in comparison of equity or debt centered portfolio.

Problems due to lack of rebalancing-

• Sudden change in market value impacts the entire portfolio.

• High risk creates the situation of huge loss.

• Less productive returns are generated on invested amount.

• Investor’s funds are not utilized to the fullest.

Benefit of rebalancing under Wealth Elite-

• Client receives expected returns which help in retaining them.

• More investors show interest to deal with advisor.

• Business productivity improves with client satisfaction.

• Sales and revenue for the firm increases.

Strategies of Rebalancing-

• Fixed Interval: Rebalancing of portfolio at certain interval is effective way to optimize the funds invested by client. The popular mode is yearly rebalancing among the quarterly, half yearly and annually.

• Percentage Change: The advisor can perform the method in case of movements in the market value of assets like the market rise with 15% then advisor gets alert to rebalancing the investment.

As per the dynamic changes in the business operations advisor should adapt the current trends that help them to gain significant percent of market share of investors. Moving against the flow leads to disastrous results for both the firm and advisors because they tend to lose the clients and worth in the industry.

The reason behind success of any firm is to perform the operations in the right direction and effectively which is done through proper strategies and method. Thus following relevant strategy is must for every advisor in order to get desired results and maintain efficient relationship with the clients for a longer period.