We believe an optimized rebalancing that maintains the target asset allocation is a meaningful contributor to long-term returns, and rebalancing is one of our value-added services for clients. Over time, the value of individual investments in your portfolio will move up and down and drift away from your target asset allocation. If an underlying fund drifts by more than 15% from its target allocation (i.e. a fund with a target allocation of 20% moves by +/-3%), we will send you an email to inform you. Please note that if the deviation from the target allocation is less than $100 in value, no rebalancing will be advised.
You will have the option to opt out of rebalancing if you choose, by going to Account >Preferences > Auto-rebalancing Off. If you do not choose to opt out of rebalancing your portfolio back to its target asset allocation, we will go ahead to execute the rebalancing 24 hours after you receive the email.
Every cash flow (investment or redemption) is used to rebalance your portfolio towards the target weights. In the absence of cash flows, we rebalance by selling and buying existing funds in the portfolio.
There are two other types of rebalancing that can occur:
It will take 5-7 business days to fully execute the rebalancing change in your portfolio. We will first redeem the overweight funds in your new target asset allocation, and then invest in the proportionate underweight funds after the redemption is completed. Please note that during the process of changing your portfolio to reflect your new target asset allocation, you will be unable to make further changes until the change in your portfolio is fully executed.