Rebalancing the Portfolio - What is your approach

chinaco · 05-14-2007, 06:25 PM

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?

http://www.fpanet.org/journal/articl...p0406-art3.cfm

http://www.fpanet.org/journal/articl...p0407-art3.cfm

clifp · 05-14-2007, 06:38 PM

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

Alan · 05-14-2007, 06:57 PM

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.

. . . Yrs to Go · 05-14-2007, 08:33 PM

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 +/-.

audreyh1 · 05-14-2007, 09:23 PM

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.

Audrey

SecondCor521 · 05-15-2007, 11:50 AM

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

2Cor521

teejayevans · 05-15-2007, 11:52 AM

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

SecondCor521 · 05-15-2007, 01:46 PM

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.

jIMOh · 05-15-2007, 02:16 PM

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).

lem1955 · 05-15-2007, 02:38 PM

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.

05-14-2007, 06:25 PM	#1
chinaco Thinks s/he gets paid by the post Join Date: Feb 2007 Posts: 2,856	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? http://www.fpanet.org/journal/articl...p0406-art3.cfm http://www.fpanet.org/journal/articl...p0407-art3.cfm __________________ Disclaimer: I make no warranty or guarantee about the accuracy or completeness of this information. I am not a financial planner, my comments only represent my opinion.

05-14-2007, 06:38 PM	#2
clifp Thinks s/he gets paid by the post Join Date: Oct 2006 Posts: 2,138	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

05-14-2007, 06:57 PM	#3
Alan Thinks s/he gets paid by the post Join Date: Jul 2005 Location: Baton Rouge Posts: 1,232	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. __________________ Countown clock is at 15 months

05-14-2007, 08:33 PM	#4
. . . Yrs to Go Thinks s/he gets paid by the post Join Date: Sep 2005 Posts: 1,510	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 +/-.

05-14-2007, 09:23 PM	#5
audreyh1 Thinks s/he gets paid by the post Join Date: Jan 2006 Posts: 2,203	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. Audrey

05-15-2007, 11:50 AM	#6
SecondCor521 Thinks s/he gets paid by the post Join Date: Jun 2006 Location: Boise Posts: 1,331	Re: Rebalancing the Portfolio - What is your approach I'm 100% stocks so I don't rebalance at all. 2Cor521 __________________ "At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.

05-15-2007, 01:46 PM	#8
SecondCor521 Thinks s/he gets paid by the post Join Date: Jun 2006 Location: Boise Posts: 1,331	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. __________________ "At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.

05-15-2007, 02:16 PM	#9
jIMOh Thinks s/he gets paid by the post Join Date: Apr 2007 Location: Milford, OH Posts: 1,182	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). __________________ Light travels faster than sound. That is why some people appear bright until you hear them speak. One person's stupidity is another person's job security.

05-15-2007, 02:38 PM	#10
lem1955 Dryer sheet aficionado Join Date: Mar 2007 Posts: 26	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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