How does rebalancing work?

We continuously monitor your accounts using automated technology to ensure that your portfolio weights are consistent with your plan. Portfolios are automatically rebalanced in response to price changes (the markets), deposits or withdrawals, changes in your risk score, or changes in the passive funds we use. Automatic rebalancing is an included service for Wealthsimple clients.

In some instances we will use passive index funds which rather than paying out dividends, immediately reinvest them for you. If you are saving regularly into your investment portfolio (which we recommend to do if you have spare cash), then as you invest some more, that money is used to top up the funds that are drifting below our target weights for your specific portfolio. Where we have passive funds or Exchange Traded Funds that pay out dividends, just as with any regular savings, that money is used to top investments back up to be on the right mix of assets.

The cost of trading is covered in your Wealthsimple management fee. If you were to do this yourself, you could of course, but the cost of trading (if you are investing each month) will start to eat away at your cash and so future returns.

If your portfolio's weights differ from your plan weights by more than a specified amount, your portfolio will be rebalanced by the next business day. For example, a threshold of 20% means that if your plan weight is 10% for a particular asset class (e.g. UK stocks), a rebalance will be triggered if the actual weight is above 12% or below 8% (i.e. 20% of 10% is 2% plus or minus).

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