Target Weight vs Self-Balancing

šŸ„§ Pies & AutoInvest
1

Hi,

I donā€™t quite understand the point of setting target weights in a pie when the self-balancing option is supposed to balance out over- and under-performing instruments, meaning that an under-performing instrument will receive more funds and the under-performing instrument will receive fewer funds through i.e. regular auto-investments?!

So why setting target weights if self-balancing does the targeting for you or did I misunderstand this?

To put it in context - I created a renewable energy pie and added a bunch of instruments that Iā€™m comfortable investing in regularly. I want to distribute a monthly sum via auto-invest thatā€™s split equally to all instruments. I have set my target weights to equal amounts for all instruments so that my investments are spread equally, however, it says that my pie is significantly unbalancedā€¦ what am I not getting here or am I overthinking this?

Thanks!

2

I think the answer to this question ultimately boils down to: ideally, you want to add to best performers not your worst. With self-balancing, thereā€™s a danger you consistently do the latter.