Financial Advice & Portfolio Rebalancing

Portfolio rebalancing is another important task your financial adviser does which provides ongoing value and helps ensure you investments stay on track.

All investment classes behave in a different way. If we use the comparison of shares and fixed interest, shares are more volatile and generally provide a higher return over the long term, though they can and do fluctuate substantially over the short term. Fixed interest is less volatile and more predictable, but that trade off makes for lower returns.

Over time it’s expected that the share component of a portfolio will grow to be a bigger portion of an investor’s portfolio than the fixed interest component. At this point, to ensure that an investor stays closer to their risk tolerance, their financial adviser should look to sell some of the shares component and reinvest that into the fixed interest component.

This is important because it’s a way to lock in some profits from the more volatile component of the portfolio and reallocate them into the more stable component of the portfolio. This ensures that the gains aren’t put at risk from short term fluctuations and an investor can sleep comfortably knowing that they are remaining within their intended risk profile.

A good financial adviser will ensure your portfolio rebalancing continues to happen at a scheduled point so it’s not left to chance. This may be a specific date, it may be particular market target or it maybe when one part of the portfolio reaches a specific percentage. It may also be timed to take advantage of an investor’s tax planning. Alternatively, if a portfolio continues to have contributions, those contributions can be made to a specific part of the portfolio to maintain the appropriate asset allocation.

Why Blue Diamond Financial?

Financial planning is about a relationship between you and your financial adviser. If they are working for you and understand you and your situation they will be looking to make your portfolio rebalanced to ensure it aligns with your goals and tax planning circumstances. At Blue Diamond Financial we are client first and operate on a fiduciary basis meaning they have your best interests at heart.

Blue Diamond Financial are licensed to FYG Planners, a privately owned AFSL. This is in contrast to major banks and institutions, where the advisers see their clients as sales targets without an incentive to lower your investment costs.

If you want a second opinion on your asset allocation, or just want an obligation free meeting with a fiduciary financial planner across Sydney or in the Norwest and Hills District, give Blue Diamond a call on 1800 773 202

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