How Does Automatic Rebalancing Work In Investing?

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If you are planning to invest to you are a regular investor, your portfolio balancing is important. A balanced portfolio shows that your asset allocation is on track for investment goals. If you are more into investing, you must opt for automatic rebalancing which reduces your workload.

Here, we will discuss automatic rebalancing, how it works, and its benefits.

Automatic Rebalancing

Automatic rebalancing helps you to rebalance your portfolio if it gets out of track. The market fluctuations can lead to an unbalanced portfolio.

Using an automatic rebalancing feature, you can rebalance your portfolio easily by selling out your excess securities and buying what you are lacking. Robo advisors are the most popular automatic rebalance feature which reduces pressure from your mind and manages your portfolio perfectly.


How does automatic rebalancing works?

The automatic rebalancing gets activated itself when your portfolio misses the track, your brokerage’s algorithm or rob- advisor comes in action to fix the problems. You can also choose the rebalancing time period like a month, quarterly, or annually.

As per your selection, they will you those securities which are in excess and buy those which are lacking. This will bring your account back on track.

Benefits of automatic rebalance feature

Automatic rebalancing is a highly beneficial feature for regular investors. Some of the benefits are listed below:

No more emotional aspect of investing

Sometimes emotional decisions in investment can give you a huge loss. When the market crashes, investors try to just sell off the stock and save their money but many a time, the buy and hold option can help you make more profit. The automatic rebalancing feature avoids these emotional decisions as you no more have to worry about market ups and downs. The automatic rebalancing feature will take care of it and keep your portfolio strong.



Mitigates risk

If you don’t keep your portfolio balanced, you are at the market’s mercy. The market decides your allocation and obviously, you will not like this happening.

Reallocates assets according to your investment goals

While setting up the portfolio, you must have considered certain guidelines and timelines, and your allocations must be working based on all the calculations but remember market can change unpredictably. TO reach your investment goals, it is important to reallocate your portfolio. The unbalanced portfolio is a big stress and attracts losses. The automatic rebalance can help you stay out of stress.

Balances your portfolio

While rebalancing your portfolio, you are in charge of your allocations. When you let the market dictate your allocations, it can leave you out of balance.


Provides dollar-cost averaging

With Auto rebalance set up, you buy assets at their present rate instead of waiting for the best price. Invest in different intervals to make the best out of your portfolio. This is called dollar-cost averaging which can give your great deals and sometimes bad deals too but in the end, everything will be balanced out.

Flexible investment

Automatic rebalance offers you a flexible investment. You are not only confined to changing allocations but also can sell or buy in between the auto rebalance occurrence.


For hands-on investors, the automatic rebalance is the best friend who takes care of their portfolio perfectly without leaving any chance of loss or unbalanced portfolio.


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