Rebalance window
In FA, you can create model portfolios or investment plans and use these to keep your investment portfolios in balance through rebalancing the investment portfolios. The content and weights of your investment portfolios fluctuate as the market fluctuates, and rebalancing is used to realign the weights in your investment portfolio to match the original model. Rebalancing is a useful tool especially for discretionary asset management.
When models are created in the system and linked to a portfolio, the contents of the portfolio can be rebalanced to correspond with the contents of the model. Rebalancing creates trade orders to buy and sell securities in order to maintain the similarity between the contents of the investment portfolios to their linked models. When executed in FA, the transactions created to the rebalanced portfolio based on the trade orders will lead to the portfolio contents to be similar to the contents of the model.
For the entire rebalancing process, see Steps to rebalance portfolios against model portfolio or Steps to rebalance portfolios against investment plan. Rebalancing can be easily accessed from the Overview: when a portfolio is selected, rebalance the single portfolio through right-clicking it and choose Rebalancing. Alternatively, you can rebalance all the portfolios linked to one model portfolio with the Rebalance button on the Rebalance view or Model portfolio window. In addition, you can rebalance multiple portfolios linked to different model portfolios or investment plans at one go through the Rebalance button on the Portfolios view.
Rebalancing window allows you to define the rebalance parameters and the securities to be rebalanced. The window lists all the securities found in the portfolio or model portfolio / investment plan linked to the rebalanced portfolio and indicates the shares of these securities in the investment portfolio and model. The account of the portfolio is also included in rebalancing: the portfolio's account is indicated in the Rebalance window with the currency of the account.
At the top of the Rebalance window, you can define the criteria and parameters for rebalancing.
Affected portfolios section includes criteria for defining which portfolios will be rebalanced
Rebalance against - allows you to choose between options Investment plan, Model portfolio, Portfolio itself; Model portfolio, Investment plan, Portfolio itself; Portfolio itself or Empty portfolio. The selection determines whether portfolio(s) are rebalanced against its defined investment plan or linked model portfolio, and if both are defined, which is used over the other. Portfolios can be rebalanced against defined investment plan (default if found), linked model portfolio (default, if no investment plan is found) or shares defined manually (default, is no investment plan or model portfolio is found). You can also empty your portfolio with the corresponding option - this will set all the new shares as 0 % and thus sell everything away from your portfolio, regardless of the linked model or plan.
Model portfolio - when rebalancing portfolios from the Rebalance view, the field instead shows the model portfolios investment portfolios can be rebalanced against. When several portfolios (a customer or a group) is selected in the Customer, group, portfolio field, changing the model portfolio will rebalance all the portfolios in the selected portfolios, linked to the chosen model portfolio.
Customer, group, portfolio - shows the customer, group or portfolio the rebalance is performed against. When rebalancing from the Overview, shows the name of the rebalanced portfolio, and when rebalancing from the Rebalance view, allows you to select which portfolios the rebalance is done against.
Number of portfolios: x - shows the number of portfolios to be rebalanced with the current set-up.
Include sub-portfolios - select whether you want to utilize sub-portfolio structures in rebalancing. When selected, rebalancing aggregates the positions and investment plan / model portfolio contents also from the reblanced portfolio's sub-portfolios, allowing you to divide your holdings into sub-portfolios, but still to be able to manage and rebalance everything at once through the main portfolio. Trade orders are created either to the main portfolio or the sub-portfolios based on which portfolio or portfolio's investment plan / model portfolio the trade order's security can be found in: for sells of existing positions, trade orders are created in the same portfolio where the position currently is, and for buys, trade orders are created in the same portfolio which has the position in the investment plan / model portfolio.
Rebalance parameters section includes criteria for defining how rebalancing logic forms the trade orders. For additional information and details related to certain parameters, see also Rebalance parameters - details.
Date - choose the rebalancing date (default current date), which determines the date of the market prices to be used AND the model portfolio / investment plan content used in rebalancing. The percentage shares of securities in the portfolio are determined based on the market prices of the security on the selected rebalancing date, and the selected date's market prices are used in calculating the amount of trade orders to be created from rebalancing. The target positions and shares defined in the linked model portfolio / investment plan are also fetched based on the selected rebalancing date. See also Market prices and values used in calculations.
Restrict rebalancing to accounts - when selected (default not selected), rebalancing restricts rebalancing to only try to achieve the target level for portfolios' accounts, i.e. rebalancing would only buy enough to spend excess cash or only sell enough to cover insufficient cash, but not do any other buys or sells. This feature is also available through manually selecting all account positions in the table below. This feature has different effects depending on the selection in Select to buy with extra cash and/or cash from sells - see documentation for the different scenarios below. See also Restricting rebalancing to accounts.
Rebalance method - choose the "available cash" that rebalancing can use to "buy" and to create buy trade orders (this field was before called "Select to buy with extra cash and/or cash from sells"). If there is not enough available cash for all the buy trade orders to be created, the trade orders are created one by one from largest to smallest as long as there is available cash (last trade order might be only "partially" fulfilled): the trade orders that have the largest share difference between the current share in the portfolio and the target share in the model portfolio are created first. See also different Rebalance scenarios.
Conservative (buy only with extra cash in portfolio) - (default option) securities are only bought with the excess cash in the portfolio's accounts that exceeds the target percentage share defined for the account in the model.
If rebalancing is not restricted to accounts (default option), the excess cash in the portfolio is the cash exceeding the defined target share. All sells are executed and buys are executed as long as there is available cash available in the portfolio's account.
If rebalancing is restricted to accounts (any of the accounts in the portfolio is selected to be rebalanced), the excess cash in the portfolio is the cash exceeding the defined target share. Securities are bought and sold ONLY to achieve the defined target level of the account. If there is excess cash in the portfolio's account, the selected securities (largest first) are bought as long as there is available cash in the portfolio's account but nothing is sold. If there is not enough cash in the portfolio's account, the selected securities (largest first) are sold as long as the account reaches the defined target level - nothing is bought and securities are sold only to rebalance the account to the defined level.
Exchange (buy only with cash from sells) - securities are only bought with the cash received from selling securities due to the rebalance.
If rebalancing is not restricted to accounts (default option), the account balance is not taken into account in the rebalance. All sells are created and buys are created only with the cash received from the sells.
If rebalancing is restricted to accounts (any of the accounts in the portfolio is selected to be rebalanced), and the account balance is below the target level, the account is first rebalanced to the defined level with sells. After this, the excess cash from sells is used to buy the securities to be rebalanced, but securities are sold only to cover all the necessary buys. If there are Executable sell trade orders, the cash coming in from these is taken into account when selling the securities.
Full (buy both with extra cash in portfolio and cash from sells) - securities are bought both with the excess cash in the portfolio (excess cash in relation to the defined target share of the account) and with the cash received from selling securities during the rebalance.
If rebalancing is not restricted to accounts (default option), all sells are executed and buys are executed as long as there is cash available in the portfolio's account and from the sells.
If rebalancing is restricted to accounts (any of the accounts in the portfolio is selected to be rebalanced), and the account balance is below the target level, the account is first rebalanced to the defined level with sells. After this, the excess cash from sells is used to buy the securities to be rebalanced, but securities are sold only to cover all the necessary buys.
Full including orders (also buy with cash from orders) - securities are bought with the excess cash in the portfolio (excess cash in relation to the defined target share of the account), with the cash received from selling securities during the rebalance and with cash to be received from outstanding trade orders with a positive cash effect (such as deposits and sells). With this selection, the base for the rebalance is not just the existing positions in the portfolio but positions in the portfolio adjusted with all outstanding trade orders (excluding trade orders with status Open) - otherwise the logic is the same as for the method "Full (buy both with extra cash in portfolio and cash from sells)". Other rebalance methods only take into account certain types of outstanding trade orders in certain ways in later stages in the rebalance logic, but this method takes into account the effect of all outstanding trade orders already as the first step in the rebalancing logic. When rebalancing portfolios with this method, the summary of the rebalanced portfolios at the bottom is updated to show the starting point for the rebalance, or your portfolio's cash and positions considering the effects of outstanding trade orders. This selection allows you to do a complete “full rebalance” and to also invest money coming into the portfolio based on outstanding orders, before you even have the transactions in. (Available from FA 3.10 onward)
Filter out small trade orders based on (before FA 3.8 "Restrict with minimum change or trade amount") - define a minimum size for the trade orders that rebalancing should create - trade orders smaller than the defined minimum will be filtered out before rebalancing suggests trade orders (small orders are just filtered out, and there is no logic to re-invest the cash the logic would have used for the small orders). You can first choose the "basis" for the filtering out small orders, and then define the minimum change / size to the field next to the selection. The filtering defined is not taken into account in cases when selling an entire position away from the portfolio - in these cases, the sell trade orders are generated without restrictions even if they are small.
Minimum change % (absolute / percentage points) (before FA 3.8 "Min change: absolute %") - define the minimum change in percentage points (how many percentage points has the difference between the percentage share of a security in the portfolio and the model portfolio at least be).
Minimum change % (relative / percentage change) (before FA 3.8 "Min change: relative %") - define the relative minimum change in percentage (how many percentage has the difference between the share of a security in the portfolio and model portfolio at least be).
Minimum trade amount - define the minimum trade amount (in portfolio currency) for the trade orders to be created - smaller trade orders will not be created. Alternatively, you can define you can define a Minimum trade amount for each of your securities, when trade orders smaller than the security-specific minimum will be filtered out.
Position is within min/max share - filter out small trade orders if your position is within the minimum and maximum thresholds defined in portfolio's investment plan or model portfolio (depending on which you are rebalancing against). With this filtering, even if your position has deviated away from its target share, no trade orders are be created for the position if it is still within its minimum and maximum thresholds. See also Filtering out small trade orders based on position being within min and max thresholds. (Available from FA 3.8 onward)
Select accounts to be included - select which portfolios' accounts' balances are included in the available cash that rebalancing can use for buys, if you have selected to buy with extra cash in the portfolio. This allows you to prevent rebalancing from inaccurately utilizing cash from your other or non-cash accounts. If you select to Include only cash accounts / the default account in available cash, rebalancing excludes these accounts' balance from your portfolio's total value when calculating how much to buy or sell (available from FA 3.10 onward). This allows you to keep your portfolio “fully invested” and exclude certain accounts from rebalancing altogether (for example, if you exclude your accrued fee accounts from rebalancing, rebalancing will disregard them completely and invest all your available cash, without reserving cash on the account for capitalizing the fees sometime in the future).
Include all accounts in available cash - (default option) the available cash in the portfolio equals to the sum of the balances on your portfolio's all accounts.
Include only cash accounts in available cash - the available cash in the portfolio equals to the sum of the balances on your portfolio's all accounts that have been marked as "Cash accounts" in the Portfolio window's Accounts tab. All other accounts' balance is also excluded from portfolio's total value when calculating how much to buy or sell (available from FA 3.10 onward).
Include only the default account in available cash - the available cash in the portfolio equals to the balance on portfolio's default account, i.e. the first account in the account list in the Portfolio window's Accounts tab. All other accounts' balance is also excluded from portfolio's total value when calculating how much to buy or sell (available from FA 3.10 onward).
Calculate fees to trade orders - select whether to calculate fees, or to estimate the effect of an upcoming fee when generating buy and sell trade orders. If a fee is calculated, the effect of the fee is taken into account when determining how many units you can buy with you available cash and how much money you are getting from your sells, allowing you to estimate more accurately the effects of upcoming transaction fees already when generating your trade orders. Fees are also saved in the Fees field for each trade order.
Don't calculate fees - (default option) fees are not calculated to trade orders.
Calculate portfolio specific fees - rebalancing calculates / estimates a fee to each trade order by applying a transaction fee (fee type "transaction") defined to each portfolio in the Portfolio window's Fees tab. Fees are calculated to portfolio's trade orders only if a transaction fee can be found.
Calculate fixed fees - rebalancing calculates / estimates a fee to each trade order by applying the fee defined as a percentage in the field available next to the selection. Fees are calculated to all trade orders only if a fee percentage is defined here.
Trade order parameters section includes criteria for defining how trade orders are created
Set accounts to trade orders - select whether to automatically set appropriate accounts to trade orders. This allows you to direct your trade orders to specific accounts directly when creating the trade orders without having to manually modify your trade orders afterwards.
Don't set accounts to trade orders - (default option) accounts are not set to trade orders, i.e. trade orders are created with "No account".
Set the default account to trade orders - sets the portfolio's default account, i.e. the first account in the account list in the Portfolio window's Accounts tab, to all created trade orders.
Set the currency account (or default account) to trade orders - uses the account with the same currency as the trade order, if such an account can be found from the portfolio, and if a suitable currency account cannot be found, uses the default account of the portfolio to the created trade orders. If no accounts can be found from the portfolio, then the shared accounts for the portfolio are used in the same order: first using the shared account with the same currency as the trade order, and if not found, then using the shared default account.
Create trade orders with status - select the status your trade orders are created with. By default, trade orders are created with status Open, allowing you to modify them, but you can instead select your trade orders to be created with any other available status (Accepted, Executable, Sent to execution, In execution, Partially executed in the market, Executed in the market, Settled in the market, Executed, Cancelled, Rejected or Expired).
Set trade order tags - choose tags to be added to all trade orders created by the rebalance from the alternatives defined in Preferences - General - Tags. This allows you to for example mark the created trade orders with for example execution instructions.
Set portfolio tags - choose tags to be added to all portfolio affected by the rebalance from the alternatives defined in Preferences - General - Tags. This allows you to for example mark the rebalanced portfolios.
Rebalance memo - allows you to write comments and notes on your rebalances. The notes you write here will be stored to the Rebalance view, and allow you to easily search for conducted rebalances. You can for example store references, details and other information relevant for your rebalances.
At the bottom of the Rebalance window, you are presented with a summary of the current status of the rebalanced portfolio(s).
The rebalanced portfolios' positions are grouped per rebalanced portfolio: the icon next to the portfolio ID indicates whether the portfolio is rebalanced against model portfolio, investment plan or portfolio itself, and moving your mouse above a portfolio provides you with more details on how the portfolio is rebalanced, such as the name of the linked model portfolio and the full name of the rebalanced portfolio.
The content is divided into columns:
Security - the position to be affected by the rebalance (either a position in the portfolio or a in the investment plan or model portfolio)
Amount - the current amount (number of units) of the security in the portfolio
Purchase value - the current purchase value of the position in the portfolio
MPrice - the latest available market unit price of the security, with the date (and time) of the price shown in parentheses
Market val. - the total market value of the position in the portfolio with the latest available market price
Change - the change between the purchase value and the market value of the position
Share % - tells the current percentage share of the position in the portfolio, calculated with the current market price from the total value of the portfolio
Min % and Max % - tells the minimum and maximum thresholds defined for the position in its investment plan or model portfolio (available from FA 3.8 onward)
Model % - tells the share of the security in the model portfolio or investment plan
New % - shows the percentage share of the security in the model portfolio/investment plan, if linked to the rebalanced portfolio, or the percentage share of the security in the portfolio, if no model is linked to the rebalanced portfolio. The value of the field indicates the share the security is rebalanced with - the suggested percentage shares can be modified before rebalancing the portfolio and creating trade orders.
Difference % - tells the percentage difference between the percentage shares of the security between the portfolio and the model portfolio
Difference - tells the difference between the shares of the security between the portfolio and the model portfolio in "cash" in portfolio currency
Above the table, you can filter the visible positions to show only certain rows, and you can Select / Deselect all the positions visible in the table to include them in rebalancing. You can also include / exclude a single portfolio or a single security from rebalancing by clicking the check box on each row.
By default, all the individual, security level positions are shown. However, you can also choose to hide the security level positions under each portfolio through right-clicking the Overview and deselecting Show positions - to show the hidden positions, right-click the Overview and select Show positions. Whether the positions are hidden or shown is remembered for your user name: if you choose to hide the positions in your latest session, opening FA again will open the Rebalance window with hidden positions.
When the information for the rebalancing is defined and manually adjusted if necessary, the investment portfolios are rebalanced and trade orders are suggested to be created with the Rebalance button.
The trade orders suggested with the Rebalance button can be seen in the next new window. By default all trade orders suggested based on rebalancing are shown in the Trade orders window, while you can utilize the search fields to search for trade orders within the suggestion, or to filter the trade orders shown with the columns available.
Based on the defined search criteria and/or filters, the trade orders that match the criteria are listed below the search fields. You can choose to either Cancel the trade orders suggested based on the rebalancing and return to the Rebalancing window, or you can Save the suggested trade orders. In addition, you can Check limits on the suggested trade orders before making a decision to save them.
Only the trade orders visible will be saved as trade orders to the portfolio - if you want to save all suggested trade orders, clear all filters and search criteria before saving, and if you want to save only some of the suggested trade orders, utilize the search criteria and filters to restrict the trade orders to be saved.
Saving the trade orders will be done in the background - you can close the trade order listing and continue using FA while the trade orders are being created. Once the trade order creation is finished in the background, you are presented with a message on the bottom right-hand corner of the view:
Trade orders done
Created trade orders: x
When the trade orders of the rebalancing activity are saved, they become visible on the Trade orders view. If a portfolio is rebalanced again, and there are trade orders for the portfolio that have not been accepted or changed, these Open trade orders are replaced with the new trade orders. One portfolio cannot have Open trade orders saved from multiple rebalancings, and the earlier Open trade orders are replaced with newer ones. The trade orders themselves don't yet rebalance a portfolio to be similar to the model portfolio linked to it, and the saving of the trade orders only creates open trade orders to the Trade orders view, where these trade orders have to be executed to rebalance the portfolio.