What is automatic rebalancing?

When the market changes, stocks, exchange-traded funds (ETFs)1 and other assets are bought and sold in order to reach a target investment allocation. This is called portfolio rebalancing. The goal of rebalancing your portfolio is to reduce volatility and help manage risk.

Why automatic rebalancing matters

  • Always-on rebalancing is a key benefit to Automated Investor. It helps you maintain a targeted portfolio and minimizes your exposure to volatility and risk so your money is working for you as you work towards your goals.

  • Over time, your portfolio will change due to market movements. For example, your stock portion may have higher returns than your bond portion (or vice versa), leaving your portfolio out of its original alignment, and with more concentrated positions, which can increase volatility and risk. This is called “drift.”

  • Our automatic rebalancing tool will review your portfolio each trading day and make adjustments as needed to keep your portfolio invested how you want it to be.

How you can save with automatic rebalancing

Portfolio rebalancing comes with potential benefits, such as:

No transaction fees

Portfolio rebalancing is included as part of Automated Investor's online investing service. That means you don't pay any additional transaction or management fees as your portfolio is automatically rebalanced.

Tax-efficient

Automated Investor avoids capital gains where possible if the assets aren't in a tax-advantaged account, such as an IRA. This limits the capital gains tax that may be due if the asset sold has appreciated in value.

Time and effort

Automated Investor efficiently and automatically rebalances your portfolio so you don't have to. This saves you time and the hassle of having to constantly monitor your account and research when and what adjustments are needed.

How rebalancing works with Automated Investor

Weighing costs and benefits

Automated Investor uses an algorithm that identifies the benefits of automatic rebalancing. It is then determined if transactions are needed to maintain your target investment mix.

Allowing drift

We allow some drift so we can capture returns and calculate whether the benefit of automatic rebalancing makes sense based on your goals.

Investing in off-target asset classes

Any new contributions and dividends are invested in asset classes that are furthest away from the target investment mix to bring the portfolio back in balance.

Market-based rebalancing

Automated Investor rebalances your portfolio based on market movements.

Target investment mix 65 percent stocks and 35 percent bonds on target. Target investment mix one year later 71 percent stocks and 29 percent bonds off target

An example of how rebalancing makes a difference

  • A $100 portfolio has a target asset allocation of an 65/35 stock/bond split, or $65 in stocks and $35 in bonds. This is considered an on-target portfolio.

  • If throughout the year, stocks return 35% and bonds return 2%, stocks are now worth $87.75 (65 x 1.35) and make up 71% of your portfolio, while bonds are worth $35.70 (35 x 1.02) and make up 29%. 

  • This investment portfolio is no longer in balance with its 65/35 target asset allocation. Because it has more stocks than it should, it's taking on higher risk. In addition, specific positions can increase in concentration, resulting in higher volatility.

Get started with Automated Investor

If you're ready to take advantage of a portfolio that's automatically rebalanced for you, log into usbank.com or call 866-758-8655 to open an Automated Investor account.

Automated Investor is currently available exclusively for customers of U.S. Bancorp Investments and our affiliate U.S. Bank.

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Disclosures

Automated Investor legal agreements & disclosures

  1. Footnote 1

    Exchange Traded Funds (ETFs) are subject to risks similar to those of stocks, such as market risk. Investing in ETFs may bear indirect fees and expenses charged by ETFs in addition to its direct fees and expenses, as well as indirectly bearing the principal risks of those ETFs. ETFs may trade at a discount to their net asset value and are subject to the market fluctuations of their underlying investments.

    Return to content, Footnote 1

Investment and insurance products and services including annuities are:
Not a deposit • Not FDIC insured • May lose value • Not bank guaranteed • Not insured by any federal government agency.

U.S. Investments is a marketing logo for U.S. Bancorp Investments Inc.

Investment and insurance products and services including annuities are available through U.S. Bancorp Investments, the marketing name for U.S. Bancorp Investments, Inc., member FINRA and SIPC, an investment adviser and a brokerage subsidiary of U.S. Bancorp and affiliate of U.S. Bank.

Insurance products are available through various affiliated non-bank insurance agencies, which are U.S. Bancorp subsidiaries. Products may not be available in all states. CA Insurance License #0E24641.

U.S. Bancorp Investments and its representatives do not provide tax or legal advice. Your tax and financial situation is unique. You should consult your tax and/or legal advisor for advice and information concerning your particular situation.

IMPORTANT: The projections or other information generated by Automated Investor regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Results may vary with each use and over time.

Investing involves risk, including possible loss of principal.

U.S. Bancorp Investments is registered with the Securities and Exchange Commission as both a broker-dealer and an investment adviser. To understand how brokerage and investment advisory services and fees differ, the Client Relationship Summary is available for review.

Pursuant to the Securities Exchange Act of 1934, U.S. Bancorp Investments must provide clients with certain financial information. The U.S. Bancorp Investments Statement of Financial Condition is available for you to review, print and download.

The Financial Industry Regulatory Authority (FINRA) Rule 2267 provides for BrokerCheck to allow investors to learn about the professional background, business practices, and conduct of FINRA member firms or their brokers. To request such information, contact FINRA toll-free at 1-800‐289‐9999 or via https://brokercheck.finra.org. An investor brochure describing BrokerCheck is also available through FINRA.

Past performance and market conditions do not guarantee future results. There is no assurance that a particular investment mix or hypothetical performance shown will lead to actual investment results or performance. Diversification and asset allocation strategies do not guarantee low volatility, profit or protection against loss. There is no guarantee that you will achieve your goal within your time horizon, or over a longer time period by using Automated Investor. You are responsible for providing accurate and up to date information about your goal, time horizon, and risk tolerance.

If you have any questions or concerns, contact us to consult with an investment professional 866-758-8655. The illustrative portfolios cannot account for the impact that economic, market, and other factors may have on an actual investment portfolio.

Municipal Securities Education and Protection– U.S. Bancorp Investments is registered with the U.S. Securities and Exchange Commission and the Municipal Securities Rulemaking Board (MSRB). An investor brochure that describes the protections that may be provided to you by the MSRB rules and how to file a complaint with an appropriate regulatory authority is available to you on the MSRB website at www.msrb.org.

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