We do not need to remind any advisor reading this of what rebalancing is or the reason for doing so (managing risk and smoothing out returns over time). However, advisors often wait for an event to occur before rebalancing. The event could be a client meeting or one such as COVID-19, which triggered our latest bear market.

At AdvisorPeak, we believe there is a cure for being reactive to such events. The treatment involves setting up a rebalancing plan that is ‘rules-driven’ to circumvent event-driven triggers. Developing a rebalancing plan that executes through a predetermined protocol ensures that trading and rebalancing a portfolio occurs at the most optimal time. Consider these rules-driven protocols:

Volatility Driven. In an event where an asset class falls, or a significant drop in an index occurs, rebalancing during a short-lived market correction is advantageous to buying shares. If an advisor utilizes this enhancement, notifications determine when the strategy should start or repeat to rebalance the portfolio. It is important to note that this is agility based on preset rules, not emotion driven reactivity.

Calendar Determined. While rebalancing on a predetermined schedule such as yearly or quarterly makes sense, predetermined scheduling is not appropriate if missed opportunities result. A calendar determined strategy should be part of a broader rebalancing plan. With advancing trading and rebalancing technology available, rebalancing based on a timeline specified protocol only is an outdated method.

Target Driven. The most significant benefit to clients is a target driven method whereby portfolio allocations rebalance to ensure that investment goals occur. Through a target driven strategy, rebalancing occurs when the allocations have changed significantly or a client’s goals, time horizons, or risk tolerance change.

All three rules-driven protocols quickly implement for ‘best practices’ in trading and rebalancing using AdvisorPeak software. Execute trades and rebalance in seconds using the right technology with the right algorithms, real-time data, and alerting.  Schedule a demo to experience how easy AdvisorPeak makes it to set up a ‘rules-driven’ rebalancing plan.