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Rebalancing the Portfolio - What is your approach
Old 05-14-2007, 06:25 PM   #1
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Rebalancing the Portfolio - What is your approach

Do you just rebalance your portfolio at the same time once or twice a year (time-based)? Or do you use a threshold (tolerance) base approach approach?

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Re: Rebalancing the Portfolio - What is your approach
Old 05-14-2007, 06:38 PM   #2
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Re: Rebalancing the Portfolio - What is your approach

It appears based on those studies and others I've seen that method doesn't matter a great deal. Personally, I favor making small correction during the year, and I only make large changes when I get more than 5% out of whack. Which for me only happened at the end of 99 and early 2000
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Re: Rebalancing the Portfolio - What is your approach
Old 05-14-2007, 06:57 PM   #3
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Re: Rebalancing the Portfolio - What is your approach

June and January each year unless I am 5% out of balance (but I can't remember the last time that happened)

Currently stocks are 1.5% higher than target but if that changes and it goes down I won't worrry about missing my chance.
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Re: Rebalancing the Portfolio - What is your approach
Old 05-14-2007, 08:33 PM   #4
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Re: Rebalancing the Portfolio - What is your approach

I'd read that longer rebalancing periods, like 2-3 years, resulted in better long run portfolio returns.

As most of my money is in taxable accounts, I'm not going to rush out every time the calendar turns to generate income for the government by rebalancing. I figure I'll rebalance when my asset allocation gets more than 5% out of whack +/-.
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Re: Rebalancing the Portfolio - What is your approach
Old 05-14-2007, 09:23 PM   #5
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Re: Rebalancing the Portfolio - What is your approach

I wait for a threshold out of balance +/- 5%, and try to wait at least a year between rebalances. I've read that 18 months was a better interval.

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Re: Rebalancing the Portfolio - What is your approach
Old 05-15-2007, 11:50 AM   #6
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Re: Rebalancing the Portfolio - What is your approach

I'm 100% stocks so I don't rebalance at all.

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Re: Rebalancing the Portfolio - What is your approach
Old 05-15-2007, 11:52 AM   #7
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Re: Rebalancing the Portfolio - What is your approach

Quote:
Originally Posted by SecondCor521
I'm 100% stocks so I don't rebalance at all.

2Cor521
not even small caps vs large, domestic vs international?
TJ
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Re: Rebalancing the Portfolio - What is your approach
Old 05-15-2007, 01:46 PM   #8
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Re: Rebalancing the Portfolio - What is your approach

TJ,

My portfolio is all* in VFINX or VTSMX, so I get a tiny bit of small cap in the latter. International exposure is only through the foreign earnings of those US companies in the aforementioned funds.

2Cor521

* Except: some of my kids' college funds are in a "target 20XX" type of 529 investment, and I have my emergency fund of 5 months expenses in a HYS account. And my new 401(k) is in SWPIX, but that's less than 1% of my portfolio at the moment.
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Re: Rebalancing the Portfolio - What is your approach
Old 05-15-2007, 02:16 PM   #9
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Re: Rebalancing the Portfolio - What is your approach

Twice a year.

June 1 I modify contribution percentages only.
Dec 31 I reset contribution percentages, then rebalance by buying/selling.

In June most years the target pecentages are off by around 1% per category... so it is a minimal move from June-December. In December there is always buying and selling.

This prevents me from reacting to hiccups thru year (up 1-2% in a day or down 1-2% in a day).
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Re: Rebalancing the Portfolio - What is your approach
Old 05-15-2007, 02:38 PM   #10
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Re: Rebalancing the Portfolio - What is your approach

I'm still working:

401(k) is professionally managed by employer trustees. Money is added every two weeks and invested according to a target portfolio. Larger rebalancing done when needed +/- 5%. I set a target and plan for rebalancing SO and my IRA's once a year, and then check them before actually contributing. Then I don't examine them for balance until next year. Outside of those retirement accounts, I have only a money market savings account - 3 month emergency fund and a small taxable balanced mutual fund.
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