What is rebalancing?

Rebalancing refers to restoring the original balance of a portfolio. In other words, it is the rule-based reallocation of the various securities in a portfolio.

Price changes on the stock markets cause the original composition of a portfolio to change. This also changes the portfolio risk. Without rebalancing, the portfolio would eventually no longer correspond to your personal risk tolerance.

Rebalancing also automatically leads to countercyclical behavior, which in turn can strengthen long-term risk-adjusted returns. For example, stocks that achieve high price gains compared to bonds during a phase tend to be reduced during such high phases. In weak stock market phases, on the other hand, more stocks are bought than bonds in order to restore the balance.

Rebalancing is free of charge at True Wealth and is carried out when there is a deviation of approximately 2% between the target and actual values. All commissions incurred in securities trading are included in our management fee of 0.25 to 0.50%.