Types of rebalancing:
- Auto-rebalancing: Your portfolio is out of alignment with its target asset allocation due to market movements
- Goal modification: You have modified your portfolio and its associated target asset allocation
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Recommended portfolio change: You choose to accept Endowus’ recommendations to make changes to your portfolio
Auto-rebalancing on a threshold basis
Our auto-rebalancing feature helps clients stay aligned with the target asset allocation (e.g. 60% equity | 40% fixed income) of their portfolios. Research has shown that maintaining a portfolio’s target asset allocation contributes to returns in the long term. Thus, the auto-rebalancing feature is one of our value-added services for clients.
When the allocation to a fund is out of alignment with its target asset allocation by 15% due to market movements, the auto-rebalancing feature will be triggered. For example, if a fund within a portfolio has a target allocation of 10% and, over time, this fund’s allocation moves by +/- 1.5%, the auto-rebalancing feature will trigger. Once auto-rebalancing is triggered, an email will be sent to inform you that Endowus will rebalance your portfolio after 24 hours, unless you opt out.
For portfolios containing funds with minimum investment requirements
Even when the 15% threshold has been breached, auto-rebalancing may not always proceed if the proceeds from selling overweight funds do not meet the minimum investment amount required to buy into certain underweight funds. We will not initiate a rebalancing unless we are able to reinvest the proceeds.
If this occurs, you will see a notification on your goal page informing you that your portfolio has drifted from its target allocation, with instructions for next steps. Auto-rebalancing will proceed automatically once conditions allow.
Please note: if the deviation from the target allocation is less than $100 in value, auto-rebalancing will not be activated.
How does Endowus rebalance a portfolio?
We will first redeem units in the funds overweight to the portfolio’s target allocation. After the redemption is completed, the proceeds will be invested into the funds that are underweight relative to their target allocation. This will bring the overall portfolio as close as possible to its target asset allocation.
The process takes up to 7 business days to complete. Please note that this timeline is still subject to fund and/or public holidays, and may take longer during these periods. Your trades are executed on a best-effort basis on a valid business day, which excludes Singapore public holidays and fund holidays.
For portfolios containing funds with minimum investment requirements
Rebalancing proceeds on a best-effort basis. Should the proceeds from selling overweight funds not meet the minimum investment amount for an underweight fund with a minimum investment requirement, that fund may not be purchased as part of the rebalance, and we will use the proceeds to bring your portfolio as close as possible to its target allocation across the remaining funds. Any uninvested proceeds will be credited to your uninvested cash balance, SRS account, or CPF account (based on the relevant funding source), and you will be notified accordingly.
How do I turn the auto-rebalancing feature on and off?
Log in to your Endowus account > Preferences > turn Auto-rebalancing Off.
Auto-rebalancing for Factors Portfolio
As a discretionary portfolio, the auto-rebalancing feature is turned on by default for the Factors Portfolio. Opting out of the auto-rebalancing feature via Preferences will not apply to the Factors Portfolio.
For the Factors Portfolio, we will auto-rebalance the portfolio’s asset allocation and make changes that are necessary to meet the portfolio’s objectives. If we find better-performing and/or lower-cost funds that add value to the Factors Portfolio, we will directly change the funds in the portfolio and keep you informed of these changes.
The discretionary nature of the Factors Portfolio allows us to upgrade the portfolio more efficiently for you. We do not make tactical changes to the portfolio’s asset allocation according to economic conditions. We adopt a passive asset allocation strategy and encourage clients to stay invested in a risk-appropriate asset allocation until their investment objectives have been met.
* Things to Note
- Every transaction (be it an investment or redemption order) placed will bring your portfolio closer to its target asset allocation, even if you have opted out of auto-rebalancing. Transactions may not proceed if the amount allocated to a fund falls below its minimum investment requirement, if any.
- If there is an ongoing Endowus fee charge, rebalancing will be delayed till the fee charge is complete. This prevents any overselling of your units due to fluctuations in the NAV.