What is Automatic Asset Rebalancing and How Does It Work?

Shawn Plummer

CEO, The Annuity Expert

Like most people, you have no idea what automatic asset rebalancing is. And that’s okay – it’s a fairly complex concept that few people are familiar with. In this guide, we will break down what automatic asset rebalancing is and how it works. We’ll also discuss using this strategy to manage your investments.

What Is Automatic Asset Rebalancing?

Automatic asset rebalancing is an investing strategy with variable annuities that helps you keep your portfolio balanced and aligned with your investment goals. It does this by selling assets that have increased in value and buying assets that have decreased in value. This process ensures that your portfolio remains diversified and reduces your risk of losing money.

Types Of Automatic Asset Rebalancing

There are two main types of automatic asset rebalancing: periodic rebalancing and threshold rebalancing.

  • Periodic rebalancing is when you set a schedule to rebalance your portfolio, such as once per year or quarterly.
  • Threshold rebalancing is when you only rebalance your portfolio if an asset’s value has deviated from its target allocation by a certain percentage.

Both periodic and threshold rebalancing have their advantages and disadvantages. Periodic rebalancing is simpler to implement and requires less monitoring than threshold rebalancing. However, threshold rebalancing has the potential to save you more money in taxes because it only triggers trades when necessary.

No matter which type of automatic asset rebalancing you choose, the goal is always to keep your portfolio diversified and aligned with your investment goals. Doing this can minimize your risk of losing money and maximize your chances of achieving your financial goals.

Conclusion

In conclusion, automatic asset rebalancing is an investing strategy that helps you keep your portfolio balanced and aligned with your investment goals. It does this by selling assets that have increased in value and buying assets that have decreased in value. This process ensures that your portfolio remains diversified and reduces your risk of losing money.

If you have any questions about how it works or whether it’s right for you, our team of financial advisors would be happy to help. So contact us today to get started!

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Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

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