This help article is meant to explain what Periodic rebalancing is and how you can utilize it to manage your portfolio. You can read more about Rebalancing here.
What is Periodic rebalancing?
Periodic rebalancing is a systematic approach to portfolio management that involves regularly adjusting the composition of your portfolio to maintain your desired asset allocation. The goal is to ensure that the portfolio's risk and returns are in line with your investment objectives. This approach is in contrast to threshold-based rebalancing, which only triggers a rebalance when the deviation between an assets current and target allocations exceeds a predefined threshold.
Said another way, periodic rebalancing is a constant timer on which Shrimpy Pro will evaluate your portfolio and correct any variances between your current and your target allocations.
Why use Periodic rebalancing?
Periodic rebalancing helps investors to stay disciplined and avoid making impulsive decisions based on market fluctuations. By sticking to a predetermined schedule, investors can take emotions out of the equation and rely on data-driven decisions. This helps to prevent portfolio drift and keeps the portfolio's risk in line with your investment objectives.
How to use Periodic rebalancing
Rebalance frequency is an option that you must choose when creating an automation, and you cannot save an automation without having a predetermined rebalance frequency. You can read more detailed information about how to create an automation here.
The Periodic rebalance dropdown selector has been highlighted in the screenshot below.
Which intervals are available for Periodic rebalancing?
Unless you're using the "Never" option, you must enter a whole numeric value, and you can choose from the following intervals:
By combining the numeric value with the selected interval, you are able to create and fine tune your rebalance frequency to fit your trading strategy. For example, "Annually" is clearly not an option, but you are able to create an annual rebalance schedule by using 52 weeks, 365 days, or if you're feeling extravagant you can use 8760 hours - although we'll convert it to days for you automatically. All of these options will result in one rebalance per calendar year.
Choosing the "Never" option indicates that you do not want any automated rebalances to occur unless they are initiated manually from your Dashboard.
If you are unsure which rebalance frequency is right for your trading strategy, you may find some insight in our backtest study that covers various popular rebalance frequencies utilizing 3 years of data, which can be found here.
Rebalance status indicator
You are able to see when your next scheduled rebalance is going to occur by utilizing the rebalance status indicator, which can be found at the top of your dashboard and is highlighted in the screenshot below. In addition to showing when your next scheduled rebalance will take place, you are also able to see a progress bar and an option to cancel for any active rebalances.
Have questions, comments or concerns? Feel free to reach out to us via the blue "Support" button found in the bottom left corner of your Dashboard, or send an email to Support@Shrimpy.io.