Author Topic: Rebalancing Calculator  (Read 4895 times)

Dodge

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Rebalancing Calculator
« on: March 11, 2015, 10:16:04 AM »
I've been asked to share my rebalancing calculator, so I thought it'd be best to put it in a thread.

This is what it looks like fresh:



Put in the current values for your portfolio, and it will tell you if you need to rebalance:



You can also include contributions, and it will calculate a "Contributions Only" column, if you prefer Lazy Rebalancing (rebalancing with contributions only).  It will include the contributions in the main rebalance calculation:



Finally, if you input a negative number for "Amount to Invest" it will tell you which assets to withdrawal, while keeping you as close as possible to your target allocation:



If you don't have Excel, it works great in LibreOffice - https://www.libreoffice.org

The calculator is based on Vanguard's Best Practices for portfolio rebalancing.  Rebalancing is easy, and you're just fine doing it once a year.  This is what Vanguard says about rebalancing:

"Our findings indicate that there is no optimal frequency or threshold when selecting a rebalancing strategy. This paper demonstrates that the risk-adjusted returns are not meaningfully different whether a portfolio is rebalanced monthly, quarterly, or annually".  As a result, they recommend rebalancing annually, with a 5% threshold.  They call this the Time-and-threshold rebalancing strategy, and describe it as:

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Strategy #3: ‘Time-and-threshold’

"The final strategy discussed here, “time-and- threshold,” calls for rebalancing the portfolio on a scheduled basis (e.g., monthly, quarterly, or annually), but only if the portfolio’s asset allocation has drifted from its target asset allocation by a predetermined minimum rebalancing threshold such as 1%, 5%, or 10%. If, as of the scheduled rebalancing date, the portfolio’s deviation from the target asset allocation is less than the predetermined threshold, the portfolio will not be rebalanced. Likewise, if the portfolio’s asset allocation drifts by the minimum threshold or more at any intermediate time interval, the portfolio will not be rebalanced at that time."
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So they recommend looking at the portfolio once a year, and rebalancing only if it deviates by 5% from your target.  If it doesn't deviate, don't rebalance.  They did the math using market returns from 1926-2009, and charted it out for us:



Their portfolio from 1926 to 2009 only had to rebalance 28 times, or about one out of every 3 years.  Don't worry about rebalancing, that's the easy part.  The hard part is keeping your costs down, and staying the course :)  Let me know if anything's broken!

Edit: Just realized you can't see the link if you aren't logged in. Login to see the file.

Edit 2: New version which auto updates balances based on market price, requires LibreOffice 4.4+ and this extension:

http://extensions.libreoffice.org/extension-center/smf-extension
« Last Edit: February 02, 2017, 11:00:25 AM by Dodge »

KS

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Re: Rebalancing Calculator
« Reply #1 on: March 11, 2015, 11:38:18 AM »
I'm about due for my first rebalance soon, and it looks like this will save me some number crunching, thanks for sharing!

Kaspian

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Re: Rebalancing Calculator
« Reply #2 on: March 11, 2015, 01:23:40 PM »
LOL!  Did you just steal this from Sqawkfox and change the flag?!!  She's had hers up for years.

Dodge

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Re: Rebalancing Calculator
« Reply #3 on: March 11, 2015, 03:30:12 PM »
LOL!  Did you just steal this from Sqawkfox and change the flag?!!  She's had hers up for years.

Yup.  It's based on a calculator I got from that site.  All my other posts of the calculator included the Sqawkfox logo.

Kaspian

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Re: Rebalancing Calculator
« Reply #4 on: March 12, 2015, 10:59:09 AM »
LOL!  Did you just steal this from Sqawkfox and change the flag?!!  She's had hers up for years.

Yup.  It's based on a calculator I got from that site.  All my other posts of the calculator included the Sqawkfox logo.

It's a good, simple calculator...  I'd modified it the same way--sort of added a "contributions only" column so it was easier to keep track of where to add new money.

Dodge

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Re: Rebalancing Calculator
« Reply #5 on: April 19, 2015, 03:49:48 PM »
Updated, the sheet will now auto-update balances based on market movements:



Simply change the number of units held down below, and everything will be calculated from there.

wtjbatman

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Re: Rebalancing Calculator
« Reply #6 on: April 19, 2015, 04:14:52 PM »
LOL!  Did you just steal this from Sqawkfox and change the flag?!!  She's had hers up for years.

Yup.  It's based on a calculator I got from that site.  All my other posts of the calculator included the Sqawkfox logo.

Don't you think you should include that info in your original post? When you say "I've been asked to share my rebalancing calculator", you make it sound like it's something you created.