SmartBalancing

The ETF (Exchange Traded Fund) Models I create (yes, I do it, because I love it & like to do things the hard way)... get rebalanced, not by old school clicking & selling/buying, but something way cooler than that.

I use a high-tech advisor exclusive platform, which features the ability to use trading bands, so it allows something to run up or go down a specified % before buying/selling. Isn't that pretty sweet?! 

For example, I use 20% allocation bands for all portfolios & perform rebalances that intentionally exclude individual stocks. The bands allow a model I've programmed to increase 20% or decrease 20% before buying/selling.

Let's say I've got a 20% Large Cap US allocation on a portfolio model... it can go up to 24% of the portfolio before selling off on a rebalance, or down to 16% of the portfolio before buying more. While this methodology has the ability to increase return over time (letting things run a bit either way before rebalancing), the primary purpose is to stay within the risk tolerance, while having a nominal yet reasonable amount of variation in risk levels.

Much like a target date portfolio, these risk levels can be revised downward overtime. Smart rebalances can even be used to disperse cash for income needs in retirement.

Thanks for reading!

Phillip Hanks