As markets go up and down over time, your asset allocation will deviate from the strategic plan we initially set in place. A portfolio rebalancing strategy brings your portfolio back in line with your strategic asset allocation.
A portfolio rebalancing strategy is important for managing risk, but it requires trading, and there are costs to trading. Our approach to rebalancing strikes a balance between managing the risk of a large deviation from your strategic asset allocation target and minimizing trading costs.
We set tolerance bands for each asset class.
We use a robust trading system to monitor compliance with tolerance bands on a daily basis.
To minimize costs and tax events, we will remedy strategic investment allocations that move outside the tolerance band without fully resetting the total portfolio.
When possible, we use portfolio cash flows to rebalance the portfolio back into alignment with your strategic asset allocation.
Beyond this strategic approach to portfolio rebalancing over time, we may also tactically rebalance your portfolio in periods of meaningful market dislocations. For example, when stock markets dropped meaningfully at the onset of the COVID-19 pandemic, we opportunistically increased stock allocations for our clients to take advantage of falling prices that we thought to be exaggerated.
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Frequently Asked Questions
Portfolio rebalancing is a process of making trades in a portfolio to periodically bring the overall asset allocation back in line with the strategic levels that are consistent with an investor’s long-term financial goals. It requires selling assets that are over-weight and buying assets that are under-weight the target position size. When done correctly, portfolio rebalancing weighs the costs related to trading (fees and tax implications) with the benefits of bringing the portfolio back in line with the original allocation.
While strategic portfolio rebalancing responds to past market movements, tactical rebalancing is more forward looking. It is the process of temporarily adjusting an overall asset allocation based on significant market or economic events that are expected to create meaningful future portfolio risks or opportunities. As an example, during the dramatic stock market decline in early 2020 as the COVID-19 pandemic unfolded, Heritage Financial tactically rebalanced our clients’ portfolios out of bonds and into stocks, which were much more attractively valued. As stock prices recovered, we strategically rebalanced portfolios back to their long-term allocations, locking in the gains from our tactical rebalances.
Taxes are a part of investing. But there are ways to reduce taxes so that you can keep more of what you earn. Asset location, a thoughtful approach to strategic portfolio rebalancing, periodic tax-loss harvesting, gifting of appreciated assets instead of cash, and managing taxable income through traditional individual retirement account (IRA) to Roth conversions are all wealth management strategies that Heritage Financial uses as appropriate to help to minimize taxes where possible.
What Our Clients Say
We feel very fortunate that we chose Heritage to be our financial managers. We know our savings are in good hands.
Kathy & Gary , Massachusetts
Over the years that I have been a client at Heritage, they have done a superb job of listening to my financial goals, and helping me achieve them. Thanks to them, and all things being equal, my retirement is and will be calm, financially sound, and will allow me to remain as independent as I wish. I value their insight, respect their continuing research, and appreciate that they continuously study to remain informed and current about the markets and the financial future we can all look forward to.
Sue , Massachusetts
Mary and I have long thought that one of the best things we have done is to use Heritage Financial to take care of our financial affairs. In that regard, we feel Heritage Financial is doing an excellent job and quite frankly, we sleep well at night without any money worries. But more than that, we have met very nice, friendly, professional people at Heritage. Mary and I value these relationships very highly. The service that you both provided me today is deeply appreciated and more “frosting on the cake”.
Heritage Clients , Massachusetts
Our experience with Heritage Financial services, has been nothing short of admirable. We have been with Heritage Financial for a long period of time, in which we’ve developed a strong and lasting relationship and friendship with many of the wealth advisors there. The advisors have been kind, honest, trusting and compassionate. Their advice has helped us make important financial decisions. We have recommended Heritage Financial to many of our friends, and family, and we will continue to recommend them.
Heritage Clients , Massachusetts
Peace of mind and a feeling of security is what all of us wish for as each year flies by during these uncertain times. I wish I had not waited until 2019 before enlisting the help of HFS, but better late than never!
The team at HFS is approachable, accessible, professional and they can explain even the most complex financial topics in laymen terms. The HFS team practices the perfect blend of the science as well as art of financial planning. I thank them for taking me and my family on as clients!
From a grateful client and her entire family , Massachusetts
This testimonial has been given by a current client of Heritage Financial Services. No compensation was provided for this testimonial.
Awards & Recognition
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