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Firecalc and rebalancing
Old 01-31-2014, 10:38 AM   #1
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Firecalc and rebalancing

Question about how Firecalc works. When it models portfolio performance over many different time periods, what does it assume about rebalancing asset allocation? If I choose a 70/30 portfolio over time, how does Firecalc rebalance the portfolio to keep it consistent? Once a year? Continual rebalancing? Also, does Firecalc deduct the transaction fees required to rebalance?
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Old 01-31-2014, 01:55 PM   #2
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FIRECalc uses yearly investment performance numbers, and it rebalances yearly. It does not include any rebalancing transaction fees.
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Old 01-31-2014, 02:06 PM   #3
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Thanks. Once a year is a relief. Wouldn't want to have to repeatedly rebalance in order to approximate Firecalc conditions.
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Old 01-31-2014, 02:17 PM   #4
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Quote:
Originally Posted by TimSF View Post
Question about how Firecalc works. When it models portfolio performance over many different time periods, what does it assume about rebalancing asset allocation? If I choose a 70/30 portfolio over time, how does Firecalc rebalance the portfolio to keep it consistent? Once a year? Continual rebalancing? Also, does Firecalc deduct the transaction fees required to rebalance?

It is also worth highlighting that it only takes into account the changes in your equity portion not your bond portion due to changes of interest rates.

So for example if you have
700K stocks that go up 30% (last year)
300K bonds that yield 3% but loss 5% in value (also pretty much last year)

The year end calculations would look something like this
700K +210k
Plus Interest from bonds 9K
Less withdrawal 40K
Equity 879K
Bonds 300K
Rebalance start of 2014
Equity 825
Bonds 353
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