Rebalancing the Portfolio - What is your approach

[chinaco]

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/articles/2006_Issues/jfp0406-art3.cfm

http://www.fpanet.org/journal/articles/2007_Issues/jfp0407-art3.cfm

 

[clifp]

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]

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.

 

[Gone4Good]

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]

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]

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

2Cor521

 

[teejayevans]

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

2Cor521

not even small caps vs large, domestic vs international?
TJ

 

[SecondCor521]

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]

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]

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.