Rebalancing portfolio an important strategy
Russell Investment’s director of superannuation, Steve Schubert, has said while investors who did not rebalance their portfolio exposure over the past three years benefited from the “bull-run”, they became significantly overexposed to equities.
According to the latest edition of Russell’s online research paper, Investor, titled ‘Don’t lose your balance’, regularly rebalancing your portfolio to ensure your asset allocation continues to match your needs and risk appetite is an important strategy.
The research paper explains how an inappropriate asset allocation mix can leave investors exposed to too much risk or, conversely, too few returns.
Schubert said wild market fluctuations mean many portfolios no longer reflect an investor’s strategic asset allocation.
“As time goes by and markets experience their up’s and downs, an investor’s portfolio may experience gains in some asset classes and losses in others, causing their strategic asset allocation and actual portfolio to become unsynchronised,” he said.
“After the bubble peaked in 2008, shares went into a tailspin. Investors who properly rebalanced their portfolios locked in profits as the market surged while protecting themselves from the downturn. Investors who went into the flow were left with a large share of losses and regret.”
Russell said rebalancing provides passive market timing, which is the smart investors’ disciplined approach to the concept of buy low sell high.
Recommended for you
With the final tally for FY25 now confirmed, how many advisers left during the financial year and how does it compare to the previous year?
HUB24 has appointed Matt Willis from Vanguard as an executive general manager of platform growth to strengthen the platform’s relationships with industry stakeholders.
Investment manager Drummond Capital Partners has announced a raft of adviser-focused updates, including a practice growth division, relaunched manager research capabilities, and a passive model portfolio suite.
When it comes to M&A activity, the share of financial buyers such as private equity firms in Australia fell from 67 per cent to 12 per cent in the last financial year.
