14th May 2018 - Tracey Payne

Annual Re-balancing of your Herbert Scott Proficient Portfolios

I just wanted to let our clients know that over the course of the next few days, you might receive contract notes, either electronically or by post, confirming various sales and purchases in your portfolios.  There is nothing to worry about – we have simply carried out our annual re-balancing exercise, to ensure the amount of risk in your portfolio remains as intended.

To remind you, the re-balance is something we do to bring your portfolio back into line with its original split between equities (higher risk) and fixed interest (lower risk) investments.  For example, if you are invested in our HS40 portfolio, the intention is for you to hold around 40% of equity investments and 60% fixed interest investments.  The issue is that, whilst your portfolio would have started out invested with this split, so called “portfolio drift” will occur during the year, reflecting the change in prices of the underlying funds held in your portfolio.  If this was allowed to continue indefinitely, you would find that your portfolio split would change over the years and could, for example, see your equity exposure gradually increase at the expense of your fixed interest holdings which would conversely reduce. This gradual change in asset allocation is something we take steps to avoid as it will alter your exposure to risk. Consequently, at least once a year we will carry out trades intended to bring your portfolio back into line with the original equity/fixed interest split that we started with.

Should you have any questions, as always do please feel free to contact us.

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