Rebalancing (ombalansering)
Rebalancing (ombalansering) means periodically restoring your portfolio to its target allocation. If shares have grown so they weigh more than you intended, you trim them and top up whatever has lagged behind.
How it works
Say you want 80% equities and 20% bonds. When the market rises you might drift to 88/12, and then you are carrying more risk than you chose. Rebalancing brings you back to 80/20. You can do it on a date (say once a year) or when a holding drifts past a threshold you set. The point is that it forces buy-low, sell-high, mechanically and without emotion.
Two ways to do it
The cheapest way is to steer new savings into the asset that is below target, so you never have to sell. The alternative is to sell what has grown and buy what has shrunk. Mind the tax: in a depå a sale triggers capital gains tax, whereas you can rebalance freely inside an ISK with no taxable event.
Where it shows up
- Rebalancing calculator
Rebalancing too often creates needless trades, courtage and (in a depå) tax. Once a year, or when something drifts well off target, is plenty for most people.