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View Poll Results: Whatever your target asset allocation, what interval do you use when rebalancing your portfolio?
Fixed interval - more than 12 months 4 7.27%
Fixed interval - 12 months 11 20.00%
Fixed interval - 6 months 3 5.45%
Fixed interval - 3 months 0 0%
Fixed interval - 1 month 0 0%
Fixed interval - less than 1 month 0 0%
No fixed interval - adjust when percentages are out of line greater than X% 19 34.55%
No fixed interval - other strategy 18 32.73%
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Poll: How often do you rebalance your portfolio?
Old 05-05-2006, 09:40 AM   #1
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Poll: How often do you rebalance your portfolio?

(If you don't rebalance on a fixed interval, and instead wait until the allocation percentages reach a certain value beyond your target, I'd be interested to hear what percentage difference you use as your threshold for rebalancing. Or if you've got some other strategy ...)
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Re: Poll: How often do you rebalance your portfolio?
Old 05-05-2006, 10:08 AM   #2
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Re: Poll: How often do you rebalance your portfolio?

I rebalanced when the Equity/Fixed ratio went to about 4% off of target.

I'm in the "distribution" phase, and living expenses are coming out of the fixed side.* And with significant growth on the equities side, it's getting up there again.*
So I should be busy buying more bond funds... which I just have not been able to poke myself into doing.* So the off-the-top is now sitting in a qualified money market.* It just doesn't feel right to have $ just sitting in a MM.
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Re: Poll: How often do you rebalance your portfolio?
Old 05-05-2006, 10:42 AM   #3
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Re: Poll: How often do you rebalance your portfolio?

before i knew anything (as if i know anything now) about finance i used to "rebalance" my 401k stuff about every 6 months to a year. having no idea i was rebalancing, i thought i was just tidying things up. turns out i was buying low and selling high. who knew?
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Re: Poll: How often do you rebalance your portfolio?
Old 05-05-2006, 02:00 PM   #4
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Re: Poll: How often do you rebalance your portfolio?

It has occurred to me that it might be important to rebalance not on a percentage deviation basis, but on a "percent off target percentage" basis. I'm sure that's confusing, let me explain:

If I target 60% for stocks, and my portfolio hits 62%, then I could rebalance if my tolerance was +/- 2% off target. I'm selling a bit higher and reallocating to lower-performing investments.

But if my target for REIT mutual funds is 8%, and I wait until it hits 10%, then the REIT fund has gone up over 20%. In the stock case above, I'm only up about 3% overall.

So it might make sense to rebalance not based upon an absolute percent difference (such as 2%), but as a percent off target percentage. For example, If I say that I don't want to be more than 10% off my target percentage, then I could let my stock allocation go to 66% (+10% of target percentage), but my REIT allocation could only go to 8.8% before I would rebalance. In that way, my rebalancing for any asset class occurs when the degree of being overvalued/undervalued is consistent within the class.

I'm still thinking this one through, I haven't seen it mentioned in any books. Anybody else considered this?
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Re: Poll: How often do you rebalance your portfolio?
Old 05-05-2006, 02:20 PM   #5
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Re: Poll: How often do you rebalance your portfolio?

Most of my assets are in taxable accounts, so managing taxes has to be part of my rebalancing strategy.

I review my portfolio once a quarter to see if I need to rebalance, but I try to avoid rebalancing more than every 12 months. From what I have read, research shows the optimal frequency for rebalancing in taxable accounts is something like 18 months. I try to avoid doing minor rebalancing because rebalancing is a taxable event.

I rebalance when my allocations get a certain % out of whack. My most generic way to do this is to compare my total equities with my bonds+cash. If they are more than 5% out of whack (say equities crept up over 58%, and bonds+ cash below 42%), then I trim equities to 55% and bonds+cash back up to 45%.

But I have also looked at individual equity asset classes like REITs, and trimmed them when they exceed their allocation by say 20%. So if I hold 5% in REIT funds, and they grow to 6% of the portfolio, they are 20% overvalued, and I trim them back to 5% again - something like that!

I also use the reinvestment of distributions as part of keeping the portfolio balanced. If a fund is over allocation, I don't reinvest the distributions, but let them go to cash to invest in an undervalued asset class (and to pay taxes). If a fund is under allocation, then I make sure to reinvest the distributions in that asset class. So before december of every year I check each fund to decide whether to reinvest the annual distributions or not.

Hope this helps........

Audrey
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Re: Poll: How often do you rebalance your portfolio?
Old 05-05-2006, 04:37 PM   #6
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Re: Poll: How often do you rebalance your portfolio?

usually trends run at least 2 years so generally ill rebalance every 1-1/2 years if im really really up or down or 2 years normally......i always seemed to cut myself short rebalancing every year
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Re: Poll: How often do you rebalance your portfolio?
Old 05-05-2006, 08:45 PM   #7
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Re: Poll: How often do you rebalance your portfolio?

Annually in May, however it has to show me a movement of at least 5% before I take action. If less that 5%, I review it again in a month or so just to see if it has inched up to 5%. After that, it will have it wait until next May.

My belief is that one can do a lot of long-term damage by rebalancing more often* than annually and responding to changes of less than 5%. Why? Because that's the way it is according to my IPS!
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Re: Poll: How often do you rebalance your portfolio?
Old 05-06-2006, 11:51 AM   #8
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Re: Poll: How often do you rebalance your portfolio?

Quote:
Originally Posted by Surfdaddy
So it might make sense to rebalance not based upon an absolute percent difference (such as 2%), but as a percent off target percentage. For example, If I say that I don't want to be more than 10% off my target percentage, then I could let my stock allocation go to 66% (+10% of target percentage), but my REIT allocation could only go to 8.8% before I would rebalance. In that way, my rebalancing for any asset class occurs when the degree of being overvalued/undervalued is consistent within the class.
Interesting approach, surfdaddy - sounds like you and audrey are both doing that. I have been using a more generic absolute 2% as my threshold, but the "percent of target percent" does seem like it better captures what I'm trying to do. Good food for thought ... thanks.
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