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Portfolio Monitoring & Rebalancing.

The ability to harvest gains as investments are going up, and at the same time invest in asset classes as they are out of favour is a very valuable discipline. Many investors fail to benefit from diversification, owing to a lack of discipline with respect to re-balancing.


Rebalancing benefits arise as volatility rises, so the greatest benefits come during periods like 2008/2009 when there are wild movements in portfolios. Clearly, diversification does not assure a profit or protect against a loss, but it limits the damage inflicted by large downside events.


The benefits of rebalancing can only be achieved by actually implementing a rebalancing strategy. To remain consistent with the asset allocation guidelines established by the model portfolios, each fund in which the portfolio invests will be reviewed on a yearly basis and rebalanced back to its normal weighting.


By maintaining a disciplined and regularly rebalancing the portfolio the benefits of tactical asset allocation can accrue without having consciously to engage in it.


A re-balancing meeting for the funds, should not, apart from exceptional circumstances, take place more frequently than once a year to avoid obsessing over short term fund performance.