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Portfolio Rebalancing

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Our Q&As are emailed in our Saturday Morning Report, find the answer to this question below.

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Question asked 06/07/2024

Portfolio Rebalancing

Hi James I have a question related to your Income and Growth Portfolios, although it applies to all equally. For each investment within each portfolio you have a weighting, for example for AGL in the Income Portfolio you have a weighting of 4. As time goes by, the proportion of the portfolio represented by AGL will change as its values moves up or down. This means that the more time that passes, the ACTUAL proportions (weights) don't correspond to those on your website. I am wondering whether you would ever look at "rebalancing" your portfolios (i.e. buying and selling individual shares) to realign with the weightings on your website. I ask all of this because I moved to an SMSF back in March 2024 and aligned myself with your weightings. As part of my year end analysis I was looking at how aligned my investments are to your weightings and some (e.g. AGL) are significantly different. Hope this all makes sense. Regards Mark Burton

Answer

Hi Mark,

A great question and there are a couple of practical considerations here:

The published portfolios are our target weights in each stock. As prices do move up (or down), there is obviously movement in these weights relative to the broader portfolio. In the portfolios we manage through Market Matters Invest, we do trim stocks that get too far from our targeted weighing i.e. we actively monitor this. Whether or not subscribers do this in their own portfolio is more a personal question.

With respect to AGL in the Income Portfolio we are up ~50%, so a 4% holding would be 6% all things being equal. This sort of variance would be realigned from time to time back towards the target weight.

The key takeaway here is, the published portfolios are our target weights in each stock held, which is the main concept we are trying to get across to members.

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