Portfolio rebalancing has been used in the traditional financial system for many years. It aims to regularly restore the initial proportions of cryptocurrencies in your portfolio. Currently, this is one of the most effective ways to reduce risk and increase investment returns.
To understand how this tool works in practice, let's consider the following example. Imagine you have four cryptocurrencies in your portfolio: BTC, ETH, XRP, and LTC. Each of these assets has 25% in your portfolio. The goal of rebalancing is to return each asset to its original proportions.
For example, your portfolio is $100, and you have invested $25 in each of these four cryptocurrencies according to the specified proportions. Over time, cryptocurrency prices can change, leading to your portfolio deviating from its initial proportions.
For example, the value of XRP in our portfolio has increased from $25 to $30, while the value of LTC has decreased from $25 to $20, and the values of BTC and ETH have not changed. It turns out that you currently have 30% of your portfolio in XRP and only 20% in LTC, which does not correspond to the initially planned proportions of 25%. To restore the proportions of your portfolio, you need to sell XPR for $5 and use this money to buy more LTC. This will bring your portfolio back to the initial distribution of 25% for each asset.
How does rebalancing work in J'JO?
The J'JO service automatically rebalances your assets every 28 days. Example: by investing in the J'JO35 index, which tracks the top 35 cryptocurrencies and covers over 80% of the entire market, you as an investor no longer need to spend time and resources guessing the most profitable asset. The J'JO service will buy and sell cryptocurrencies itself, adding growing ones to your portfolio and excluding weaker ones. This approach helps reduce risks for your investments and increase their profitability.