• OnlyFunds Investment Adviser Staff

Rebalancing: Keeping an Athletic Stance

The secret sauce of keeping a balanced portfolio means you're ready for any environment. OnlyFunds does this automatically, putting it on the huge list of things we do for your finances without you having to lift a finger.



What is rebalancing? It all starts with targets.

When you sign up for OnlyFunds, you answer some questions that determine how much risk you want to take in your investments. For example, if you're close to retirement, you may need your money sooner, and so your investments should be more cautious. If you're trying to reach a goal over a longer time though, you can afford to be a little bit more aggressive.


We use your answers and the financial goals you enter to assign some target portfolio allocations, which is a fancy way of saying what individual investments should go into your overall pie. This could break down in something like 60% stocks, and 40% bonds - though the algorithm are a bit more complicated than that, but the targets mean at any given time you should be in 60% stocks, and 40% bonds.


Ok, so why not just set it and forget it?

Well, every day, the market moves. On some days, stocks may go down, and bonds will go up. Or it may be the other way around! Over time, the value of the stocks part of your portfolio could end up being something like 50%, and your bonds would go up to 50%. Now you're off your targets! What OnlyFunds does for you is sell a little bit here, and buy a little bit there, and get you back to your targets. In this case we'd sell some bonds and buy some stocks. Bam, right back to where you need to be, without you lifting a finger.


But... why do the rebalancing at all? Why is it useful?

Here's where the portfolio theory comes in. We can't predict the future - and we don't try. We're setting you up to try to do reasonably well no matter how the market goes. Sometimes stocks will go up. Sometimes bonds will go up. Sometimes one may go down. We want you to be able to take advantage of each type of investment's day in the spotlight. To do that, you have to be positioned well all the time, which means: rebalancing.


Think of it like this: in almost every sport, there's a ready position. An second baseman has a certain stance and place he stands. A setter in volleyball is always going to get set up for a serve from the other team in a similar, athletic position. They may run and dive to make the play, but when they're done making that play, they get back to the ready position.


That's how you set yourself up in the best position to win - and the best part is, you don't have to dive across a court to do it! Open an account and see how we're making plays for you every day.