Portfolio Rebalancing

Our advanced technology makes rebalancing easy

  • Our algorithm weighs the costs and benefits of rebalancing and determines if transactions are needed to get you closer to your target asset allocation
  • We allow some drift so we can capture returns, and calculate whether the benefit of rebalancing outweighs its costs
  • New dividends and contributions get invested in the asset classes that are furthest from their ideal allocations
  • We rebalance your portfolio as needed based on market movements, this is known as “market-based rebalancing”
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Automated Investor

Are you new to online investing or do you prefer to have guidance from experienced investment professionals? Tell us your goals, and we’ll invest your money for you.

Exclusively for our customers, log into usbank.com to open an account today or call 866.758.8655.

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Why portfolio rebalancing matters

When you sign up for Automated Investor, we’ll ask you about your tolerance for risk and your desired retirement age. Then we’ll create a model for your portfolio, made up of 12 asset classes. Rebalancing helps you maintain the appropriate portfolio risk for your financial goals. Here’s why:

  • Over time, your portfolio will change due to market movements, this is called “drift”
  • Rebalancing restores your portfolio to its target asset allocation by selling some of your asset classes that have outperformed in the short-term, and buying more of the asset classes that have underperformed in the short-term
  • The goal of rebalancing is to reduce volatility in your portfolio, this helps to manage your risk
  • We’ll review your portfolio each trading day and rebalance it as needed

Example: Rebalancing makes a difference

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  • A $100 portfolio has a target asset allocation of an 65/35 stock/bond split, or $65 in stocks and $35 in bonds. It is balanced.
  • If throughout the year, stocks return 35% and bonds return 2%, stocks are now worth $87.75 (65 x 1.35) and make up 71% of your portfolio, while bonds are worth $35.70 (35 x 1.02) and make up 29%.
  • This portfolio is no longer in balance with its 65/35 target asset allocation. Because it has more stocks than it should, it's taking on higher risk.

Cost benefit of rebalancing

Here are other considerations:

  • No transaction fees: Portfolio rebalancing is included as part of Automated Investor
  • Tax-efficient placement: We’ll rebalance in a tax-advantaged account when possible, and factor in capital gains when not (capital gains taxes may be due upon the sale if the asset sold has appreciated in value)
  • Time and effort: Automated Investor efficiently rebalances your portfolio, so you don’t have to pay additional management fees for each rebalance

Automated Investor from U.S. Bancorp Investments is exclusively for our customers. Log into usbank.com to open an account today or call 866.758.8655.

Start investing