Back to Exchange
INVESTING STRATEGY

What is portfolio balancing and why is it recommended

Profile Picture
John Taylor.

10 November 2023

Like
1

1 Comments

Small Profile Photo
Dave Gow - Strong Money Australia

INVESTOR

about 1 year ago

Hi John.

Good question. I’ll answer it in 2 ways.

‘Portfolio Balancing’. This could simply means it’s recommended to diversify your portfolio between say Aussie shares and global shares for example. Reason being, diversification helps to avoid relying on a single outcome, spreads risk, and improves the odds of success for an investor by owning a larger more diverse group of companies.

‘Portfolio RE-balancing’. This refers to keeping a portfolio in line with its intended target. So most long term investors will have what’s called a ‘target allocation’ which they try to stick to over time. For example, let’s say that’s 50% VAS and 50% IVV. As the market moves regularly, over time the portfolio will stray from this 5050 target. So ‘rebalancing’ means to get the portfolio back to target, which is usually done by buying more shares of the one that is under target, or in some cases, means selling some of the one that is over target.

Hope that makes sense, happy to elaborate further if needed.

Cheers, Dave

Like
0
Reply

4000 characters left

Related posts

exchange image
Investing Strategy

What happens if, in 30 years when I have hundreds of thousands or even millions of dollars in shares, nobody wants to buy them?

Hi there! What happens if, in 30 years when I have hundreds of thousands or even millions of dollars in shares, nobody w...

exchange image
Investing Strategy

Best way to invest $10k for long-term growth?

Hey everyone! I’ve recently set aside $10k that I’d like to invest instead of letting it sit in my bank doing nothing. ...

exchange image
Investing Strategy

I've heard that most people would only invest in VDHG if they had to choose one ETF. May I ask why?

Hi everyone, I’m quite new to the platform, and so far I have only invested in VDHG. I've heard that most people would...

Home