According to the Independent financial expert DALBAR’s annual report, analysis of investment behavior shows that the average DIY investor underperformed the SandP500 by approximately 4.2% per year for the last 20 years. It would be wise to find wealth management services to secure your assets and your family’s future.
International diversification through an offshore wealth management company can help you take advantage of global opportunities. Like most offshore investors, your offshore assets may run under multiple asset classes.
To minimize your exposure risk and maintain your original asset allocation, your offshore wealth management company may recommend rebalancing your portfolio.
What Does Portfolio Rebalancing Entail?
When left alone, your dual or multi-class offshore assets will gradually drift away from the original target allocations agreed upon with your offshore asset management company. Volatilities in the market can destabilize your asset classes, setting you up for a bumpy ride. Your well-designed portfolio with different risk and return characteristics may require a little intervention to set you back on the right track.
Portfolio rebalancing involves adding investments to asset classes that are working below their targets and trimming the overperforming ones. The intervention by the offshore wealth management company under your direction restores the original investment allocation and keeps your risk under control.
Here are five tips to guide you through the portfolio rebalancing process for your offshore private wealth management investments.
1. Set Your Target Allocations
You may need to carefully assign thresholds for each asset class that allow you to keep a closer eye on your portfolio. With an easy 50/50 split for a dual-class offshore investment, you may decide to rebalance your books when they drop below 45% or rise above 55%. An offshore asset management company can guide you in placing the targets depending on your investment goals, time horizons, and level of risk involved.
2. Discuss Your Rebalancing Parameters
You may want to determine your parameters within which you should rebalance your offshore assets. Discuss the costs of rebalancing against the gains to be made with your wealth investment manager. A slight variation from the target can be more expensive than the benefits expected.
3. Choosing the Right Interval
You may need to determine the exact rebalancing parameters. What is the optimal time for you to consider rebalancing? Using important dates such as annual reviews can provide ample time to get the most out of your portfolio rebalance. However, be careful about shorter timeframes such as quarterly results as they are easily affected by the volatility within the market.
4. Inquire About Potential Taxes and Fees
Rebalancing individual stocks may involve a larger number of transactions, bid and ask spreads, and taxes. Your offshore asset management company can mitigate your exposure by utilizing global banking services to inject new cash to prop up any holding rather than selling stocks that can generate taxable gains. Discuss the fees and taxes involved in your portfolio rebalance with your asset manager.
5. Automation may Remove all the Stress
Your offshore asset management company can set up an auto rebalancing feature for your account. Your asset classes will periodically rebalance your holdings depending on the percentage allocation set.
Offshore asset management is an excellent way to diversify your investment portfolio. You may need to adjust your allocation to mitigate your risk exposure regularly. For more information on portfolio rebalancing, reach out to First Anguilla Trust Company.o