The Portfolio Rebalancing Act
Portfolio Rebalancing plays an important part in keeping Raiz portfolios diversified and matching their desired risk tolerance.
At Raiz, we automatically rebalance your portfolio for no additional cost! Here’s a guide on what is involved when rebalancing a portfolio, and why it’s such an important step.
Raiz Users pick a portfolio to invest in
All Raiz users choose a portfolio to invest in. Read here for a quick introduction on what a portfolio is. Some Raiz Portfolios have a higher risk than others, some lower. Click here to see where the seven standard Raiz portfolios sit on the risk scale.
ETFs and Bitcoin prices can move over time
Markets can go up and down, and so can the prices of ETFs. This means that over time, some ETFs can perform better or worse when compared to the other ETFs in a portfolio. This can have the effect of changing the percentage weighting of an ETF in your portfolio.
What effect can this price movement have on diversification?
Let’s take an example. You have a Custom Portfolio made up of just two ETFs. We’ll call them ETF A and ETF B. They each make up 50% of your diversified portfolio.
If ETF A has a big price rise, but ETF B does not move, ETF A now represents a larger proportion of the investment portfolio weighting than ETF B.
Raiz automatically rebalances portfolios to match your original risk tolerance
In order to restore the 50/50 balance of exposure between ETFs that you had when you first invested in the portfolio, we automatically rebalance the ETFs in your portfolio. We do this by selling ETF A and buying ETF B to return the balance to 50/50.
The same goes if ETF A has a big price fall. To restore the desired 50/50 balance between ETF A and B, we will need to buy ETF A and sell ETF B.
Why do we rebalance?
Rebalancing keeps the asset allocation in sync with your risk tolerance. Given each portfolio at Raiz has a different weighting for certain ETFs compared to others, by rebalancing, we are able to restore the balance that you selected.
What would happen if we didn’t rebalance
As investments move over time, you could find yourself with a much higher weighting in some ETFs compared to others, which may not match what you initially signed up for. We rebalance to restore the balance you selected when you chose your portfolio.
You can change portfolio at any time for no additional fee
Remember, you can control when you change portfolio. You may find that you prefer a higher weighting in some ETFs versus others or want to change your risk tolerance. All you have to do is click change portfolio, and we will do the trades to change your portfolio the next business day. By us rebalancing, we ensure that your current portfolio closely matches the risk tolerance and portfolio mix that you have chosen.
To see if Raiz is suitable for you, please read the PDS.
To see Raiz fees, click here.
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Important Information
If you have read all or any part of our email, website, or communication then you need to know that this is factual information and general advice only. This means it does not consider any person’s particular financial objectives, financial situation, or financial needs. If you are an investor, you should consult a licensed adviser before acting on any information to fully understand the benefits and risk associated with the product. This is your call but that is what you should do.
You may be surprised to learn that RAIZ Invest Australia Limited (ABN 26 604 402 815) (Raiz), an authorised representative AFSL 434776 prepared this information.
We are not allowed, and have not prepared this information to offer financial product advice or a recommendation in relation to any investments or securities. If we did give you personal advice, which we did not, then the use of the Raiz App would be a lot more expensive than the current pricing – sorry but true. You therefore should not rely on this information to make investment decisions, because it was not about you for once, and unfortunately, we cannot advise you on who or what you can rely on – again sorry.
A Product Disclosure Statement (PDS) for Raiz Invest and/or Raiz Invest Super is available on the Raiz Invest website and App. A person must read and consider the PDS before deciding whether, or not, to acquire and/or continue to hold interests in the financial product. We know and ASIC research shows that you probably won’t, but we want you to, and we encourage you to read the PDS so you know exactly what the product does, its risks and costs. If you don’t read the PDS, it’s a bit like flying blind. Probably not a good idea.
The risks and fees for investing are fully set out in the PDS and include the risks that would ordinarily apply to investing. You should note, as illustrated by the global financial crisis of 2008, that sometimes not even professionals in the financial services sector understand the ordinary risks of investing – because by their nature many risks are unknown – but you still need to give it a go and try to understand the risks set out in the PDS.
Any returns shown or implied are not forecasts and are not reliable guides or predictors of future performance. Those of you who cannot afford financial advice may be considering ignoring this statement, but please don’t, it is so true.
Under no circumstance is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz Invest or Raiz Invest Super.
This information may be based on assumptions or market conditions which change without notice and have not been independently verified. Basically, this says nothing stays the same for long in financial markets (or even in life for that matter) and we are sorry. We try, but we can’t promise that the information is accurate, or stays accurate.
Any opinions or information expressed are subject to change without notice; that’s just the way we roll.
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Mastercard is a registered trademark and the circles design is a trademark of Mastercard International Incorporated.
Home loans are subject to approval from the lending institution and Raiz Home Ownership makes no warranties as to the success of an application until all relevant information has been provided.
Raiz Home Ownership Pty Ltd (ABN 14 645 876 937), an Australian Credit Representative number 528594 under Australian Credit Licence number 387025. Raiz Home Ownership Pty Ltd is 100% owned by Raiz Invest Australia Limited (ABN 26 604 402 815).
