The idea behind portfolio rebalancing is to periodically adjust the allocation of assets in a portfolio to maintain its original risk profile and investment objectives. Over time, due to market fluctuations, the weightings of different assets within a portfolio can drift, causing deviations from the initial allocation. Rebalancing involves buying or selling assets to bring the portfolio back in line with its target allocations.

Portfolio rebalancing is not typically used as a method to predict market moves. Its primary purpose is to manage risk and ensure that the portfolio remains consistent with the investor's risk profile and long-term investment objectives. By regularly rebalancing, investors can maintain their desired level of risk exposure and avoid being over-exposed to a particular asset class that may have performed exceptionally well or under-exposed to one that has underperformed.

There is evidence to suggest that portfolio rebalancing can be beneficial in various ways:

  1. Risk management: Rebalancing ensures that the portfolio maintains its target risk level, which is crucial for investors looking to align their investments with their risk tolerance and financial goals.

  2. Disciplined investing: Rebalancing enforces a systematic approach to investing, promoting discipline and discouraging emotional or impulsive decision-making.

  3. Buy low, sell high: By nature, rebalancing involves selling assets that have appreciated in value and buying assets that have declined in value. This can be beneficial in the long run as it forces investors to buy low and sell high, which is a fundamental principle of successful investing.

  4. Diversification: Rebalancing helps maintain a well-diversified portfolio, which can reduce overall portfolio risk and potentially enhance long-term returns.

In summary, portfolio rebalancing is a good practice for maintaining an investor's desired risk profile and staying in line with their original investment objectives. It is not designed to predict market moves, but rather to manage risk and promote disciplined, long-term investing strategies.

In this article, we'll explain how we handle portfolio rebalancing within our Investment PMA, including the importance of daily reviews and the various factors that may prompt a rebalance. We'll also touch upon our efforts to minimise transaction fees and the passive nature of our investment strategy.

Daily Review

We examine our model portfolios on a daily basis for several reasons:

  • Deposit of funds: Ensuring that when investors deposit funds, their allocations align with the model portfolios.
  • Withdrawal of funds: Adjusting the portfolio when investors withdraw funds to maintain the target allocation percentages.
  • Dividends and distributions: Reinvesting any dividends or distributions received to keep the portfolio aligned with the model.
  • Market moves: Monitoring market fluctuations that could cause holdings to drift from their target allocation percentages.

By conducting daily reviews, we can quickly respond to any changes and maintain the desired portfolio balance while keeping transaction fees in check.

Quarterly Investment Committee Meetings

Our our investment committee meets every quarter to review the portfolios and their benchmarks. If the benchmark has shifted significantly, the committee decides whether it's a short-term change or requires a long-term adjustment to allocations. As our mandate is to follow the benchmark, we generally adjust our portfolios accordingly.


If necessary, we may rebalance the portfolios by selling or buying holdings to align them with the benchmark. This typically occurs once a quarter after the investment committee meeting. However, we are mindful of transaction fees, such as brokerage, and try not to rebalance too often to keep costs low for our investors.

Ad-hoc Rebalancing

In rare instances, we may introduce or remove a holding from a model, prompting an ad-hoc rebalance. Historically, this has happened no more than once or twice a year.

Adding/Removing Funds

Portfolios are also rebalanced whenever funds are added or removed.

New Holdings

We may introduce new holdings, such as a more suitable ETF, to maintain low costs for investors and enhance portfolio management.

Passive Investment Approach

It's important to note that our Investment PMAs are not actively managed. We don't try to predict or anticipate market moves. Instead, we follow a passive investment strategy, which means our portfolios track the market and accept the market return less any fees.

We hope this article clarifies our approach to portfolio rebalancing within the Investment PMA. By conducting daily reviews and making necessary adjustments, we aim to maintain an optimal balance in your investment portfolio while adhering to a passive investment strategy. If you have any further questions, please don't hesitate to reach out.

Related topics

You can view and manage your InvestSMART PMA online. 

If you are already invested, visit the My Account section of the website and select My Investments to view:

  • Investment Summary
  • Current Holdings
  • Transactions
  • Dividends & Interest
  • Deposits & Withdrawals
  • InvestSMART Fees 
  • Allocation Preferences
  • Investment Preferences

Your portfolio data is updated daily. Please note, you will always see the previous days closing values.

You can switch between Model Portfolios or alter the combination of Model Portfolios on which your portfolio is constructed at any time. Your instruction will generally be acted upon during the next rebalancing date after receiving your request online.

You can submit this request by taking the following steps:

  • Click My Account and My Investments
  • Select Modify Allocations
  • Click Adjust My Allocation
  • Provide New Allocation Breakdown by Percentage (%) and then select Next
  • Select Verification and use preferred option - Email or SMS
  • Complete Verification

If your request requires additional funds to be transferred then the details will be shown in accordance with what you need to contribute along with the BPAY details unique to your investment account.

If you require assistance, please contact our friendly team via the chat function in the bottom right corner.

We are commonly asked by new clients browsing their holdings in the Portfolio Manager why they have physical cash sitting in their investment portfolio. Surely it should be invested in more shares? 

There are four reasons why this may be occurring: 

Cash Component

As referenced in our Product Disclosure Statement, every Professionally Managed Account (PMA) will hold, at the very least, 1% of the total account value in a cash component at all times.

InvestSMART draws upon this cash component to cover management fees and brokerage costs (if required), removing the need to unnecessarily sell down investments to cover the aforementioned expenses, which would be counterproductive to the progress of your investment. 

Portfolio Manager Discretion

At any point in time, the Portfolio Manager of any Model Portfolio has the discretion to adjust the holdings and weightings held, including physical cash. While this is more likely to impact active stock-picking portfolios rather than our capped-fee investment portfolios, it's not unusual to see 5% physical cash held by some models. 

Balanced Portfolio Allocation shown

Contributions or Income 

Over time your investments will pay dividends or distributions with the proceeds deposited into your cash component, and dependent on your income setting, it will either be accumulated and paid to your nominated bank account or held for reinvestment at the next rebalance. 

Contributions are also held similarly. They will be initially deposited into the cash component until there are enough available funds to trigger a rebalance of your holdings. 

The myth of "Full Investment"

Lastly, there is a common-sense reason why there might be a little more physical cash in your account. We aren't able to necessarily deploy every cent we'd like to due to the fluctuations in the price of underlying holdings on any one day, i.e. if we want to purchase $500 of ABC to rebalance your portfolio but only have $100 available, then we will have to hold fast for the time being. 


This is a Professionally Managed Account (PMA), meaning that we manage this for you. Any trading, readjusting, rebalancing is done automatically by InvestSMART.

If you have any further questions or want clarification on the above topics, then please feel free to email us at 

We sometimes get asked, "Why does portfolio performance differ from the model performance?"

Your account is designed to track the InvestSMART model portfolios you have chosen to invest in. We operate model portfolios with specific percentages assigned to the holdings and invest in the same holdings for your account to mirror the model. When the model holdings change so to will your account holdings.

Here are some common reasons why your investment return may differ from the model portfolio you are tracking:

Income sweep: If you have the Income Sweep turned on you are having the dividends paid out to you, therefore removing that cash from your portfolio. This may make it seem like your returns are lower than they are.

Your inception date: Our published model performance figures are based on month end values. For example, model performance may be +5% from 30 November to 31 December. If you established your portfolio on the 5th November and attempted to compare performance, your return may look quite different.

Adjusting/changing investment models: If you adjust your model weights during the performance reporting period, your returns may differ to our published performance. By adjusting models during the period, it becomes more difficult to obtain a like for like comparison against model performance returns.

Adding or withdrawing funds: Adding or withdrawing funds will see InvestSMART needing to buy or sell securities/shares in your account during the month. This will see you purchase or sell securities/shares at a price that may differ from the end of month price.

Size of portfolio balance: Our models operate off percentages. The larger the size of the portfolio the easier it is to match those percentages. Some accounts holdings may vary to model security weights as the high dollar value of a security (E.g., $100-600 depending on the ETF) means we can’t buy as many as is required to get close to the model weight. These residual amounts are therefore held as cash which has the effect of dampening returns when securities are going up. Of course, where securities fall, this has the effect of improving returns relative to model.


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Brokerage: The investment models do not factor in brokerage. If you add funds, withdraw funds, or change investment model’s transactions occur and so do brokerage costs.