Author Topic: Balancing  (Read 2940 times)

Le Poisson

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Balancing
« on: August 21, 2015, 11:20:52 AM »
Ok, this seems so basic, but I keep wondering if I'm playing right. How do you balance your portfolio? Is it by the dollar value or by the units held? For instance, as a Couch Potato, I'm supposed to be sitting at 50% VXC, 25% VAB, and 25% VCN. Which is what I have based on the current value of the funds, but following this wondrous market fluctuation, I am wondering if I should be balanced based on units held rather than dollar value.

As a complete newb/moron I'm not sure how I'm supposed to be balanced.

matchewed

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Re: Balancing
« Reply #1 on: August 21, 2015, 11:31:31 AM »
To your asset allocation is usually based off of a percentage of your total amount invested. So for example, if you are 60/40 stocks/bonds you will look at your overall percentage according to how you outlined it in your Investment Policy Statement (the frequency essentially, I recommend once or twice a year, no more, you can also include in here how what bounds you have around it; like is 65/35 good enough?).

Simple example: 100k total invested, planned 60/40 balance, actual due to whatever reason 70/30

Now I would sell 10k from the equity side and buy 10k more in the bond side. Alternatively I could just not buy equities and only buy bonds until I reach my desired allocation. I prefer the more immediate action. This is also dependent on whether your assets are in taxable accounts or not. You should try to avoid taxable events when rebalancing.

forummm

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Re: Balancing
« Reply #2 on: August 21, 2015, 11:33:53 AM »
How do you balance your portfolio? Is it by the dollar value or by the units held?

Dollar amounts.

Le Poisson

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Re: Balancing
« Reply #3 on: August 21, 2015, 12:04:01 PM »
How do you balance your portfolio? Is it by the dollar value or by the units held?

Dollar amounts.

Exactly what I was looking for - thanks for the simple answer!

Heckler

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Re: Balancing
« Reply #4 on: August 21, 2015, 12:15:17 PM »
And if you incur trading fees (likely with VCN etc...) to buy and/or sell, make sure to make a plan when you will balance.   Annually for me, with new contributions only to buy, never sell.

Don't rebalance due to every market fluctuation or you're fees could end up more than a 2% MER mutual fund.

Le Poisson

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Re: Balancing
« Reply #5 on: August 21, 2015, 12:35:47 PM »
I'm with Questrade, so I'm not seeing any fees (they may be hidden, but I thought QT was free for ETFs).

I just dump cash in every other week and hope for the best.

K-ice

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Re: Balancing
« Reply #6 on: August 22, 2015, 12:10:36 PM »
Yes I confirm it is % dollar amounts not stock number.

Also, what kind of a +/-  range do most of you have on your allocation?

I think +/- 5% would not require any rebalance but maybe that should be tighter.

Actually following the couch potato I am trying to keep between assertive and aggressive.

Also, I rebalance with new investments so I will not need to sell anything for a while. But I do pay about a $10 trade fee so I do not want to rebalance all three monthly.

For example using your assertive 50:25:25:

100K total
VXC is 56%
VAB is 19%
VCN is 25%

Next investment I would put 4K into VAB since it is the lowest:

VXC is 56/104 = 54%
VAB is 23/104 = 22%
VCN is 25/104 = 24%

So it is now more rebalanced than last month and within my +/- range. But I am not going to trade to the penny to make it perfect.

I hope that helps & would be happy to hear other's comments.








Le Poisson

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Re: Balancing
« Reply #7 on: August 22, 2015, 01:26:12 PM »
Yup - thats pretty much what  do, always chasing whatever fund has the low allocation - unless one stock is 'on sale' then I may dump into it.

Right now I am sitting at:
VAB - 24.33%
VCN - 25.23%
VXC - 49.36%
ZZZ - 1.08%  <---- Fun Side bet

The reason for my concern was that the fluctuation last week hit VXC harder than I expected, and I was afraid it might go by a few percent, but it didn't, so I sit back and keep on playing. My 'winners' in the downturn were VAB and ZZZ, neither came through big, but they also didn't go red, which was a pleasant surprise.

StockBeard

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Re: Balancing
« Reply #8 on: August 24, 2015, 11:42:01 AM »
How do you balance your portfolio? Is it by the dollar value or by the units held?

Dollar amounts.
Definitely dollar value. I feel it's actually the whole point of rebalancing, is that with the same amount of shares (in bonds and stocks), the value has changed, and needs "rebalancing".