Types of rebalancing:
- Auto-rebalancing: Your portfolio is out of alignment with its target asset allocation due to market movements (read more below)
- Goal Modification: You have modified your portfolio and its associated target asset allocation
- 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 of 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 be executing a rebalance for your portfolio after 24 hours unless you opt out.
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?
For the rebalancing process, we will first redeem units in the funds overweight to its target allocation. After the redemption is completed, the proceeds will be invested into the funds that are underweight to its 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.
How do I turn the auto-rebalancing feature on and off?
You may opt out of auto-rebalancing by following these steps: Log in to your Endowus account via a web browser > Preferences > 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. Please note that if you opt out of the auto-rebalancing feature in Preferences, the opt-out will not apply to the Factor 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 can value-add to the Factors Portfolio, we will directly change the funds in the portfolio. Please be assured that you will be informed of any changes that happen to the funds in the Factor Portfolio.
The discretionary nature of the Factor 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, whereby we encourage clients to stay invested in a risk-appropriate asset allocation until they have achieved their investment objective.
* Things to Note
- Every transaction (be it an investment or redemption order) for a goal will bring your portfolio closer to its target asset allocation, even if you have opted out of auto-rebalancing.
- If there is an ongoing Endowus fee charge on your Endowus account, any rebalancing will be delayed till after the fee charge is complete. This prevents any overselling of your units due to fluctuations in the portfolio's NAV.