What is rebalancing?

Ask any investment manager worth their salt and they will tell you that a long-term winning investment portfolio needs to be managed from time to time. Since no market tends to go up or down in a straight line, the value of a passive investment portfolio will similarly fluctuate during periods of volatility. Such value fluctuations can sometimes feel very uncomfortable to investors, especially novice crypto investors. This is because price swings in crypto markets are often more extreme compared to legacy markets. The best way to offset this is to maintain a well-diversified, expertly-managed crypto portfolio. This is where portfolio rebalancing comes in handy.

It’s all about risk management 

Portfolio rebalancing is simply the practice of strategically buying and selling assets in sync with a constantly fluctuating market. The goal of rebalancing is to maintain an optimal composition of assets based on your specific index. Put simply, rebalancing aims to help you manage risk by periodically selling overperforming assets and using those profits to buy underperforming assets. 

This can often be easier said than done because it’s only natural to you to continue holding an investment when its price is in an uptrend. Sure, you know that successful traders and investors buy low and sell high. As many crypto veterans have come to find out, however, it pays in the long run to avoid thinking of hyped-up crypto assets as one-way moon tickets. In fact, long-term overallocation to any one token may result in considerable losses when the asset’s price reverses. This is why truly profitable investors tend to rebalance their portfolios on a monthly and weekly basis. Little wonder then that most investors practicing this frequent rebalancing strategy are statistically likely to outperform the ‘buy and hope’ investors in the crypto markets. 

It’s a tough job but Phuture can do it

Manual rebalancing can often conflict with an investor’s emotions, as it involves actually selling some of the tokens that have recently gone up and buying more of tokens that have recently underperformed. Even though we all know that selling high and buying low is a profitable long-term strategy, putting it into actual practice requires levels of discipline many investors simply do not possess. The process also can end up eating valuable time and effort that could be spent enjoying life away from the charts. The good news is you can actually automate your portfolio rebalancing in the most DeFi way possible. 

At Phuture we enable you to hold crypto better than most by giving you access to diversified, automatically rebalancing basket of assets. Ever wanted to increase your exposure to the crypto markets but were concerned about their sometimes extreme volatility? Investing into one or more of our automatically rebalancing indices could be the solution to your dilemma. The moment you invest into a Phuture crypto index fund, you get the optimal composition of assets according to the index strategy, regardless of what the market is doing. That’s the unique advantage of our innovative crypto index products. 

There is simply no reason to manually manage your crypto portfolio. Find out how.