BLUF: What's your plan for rebalancing, and what thresholds do you use to trigger action on your part? Do you typically sell to rebalance, or just adjust future investments?
I've got our ideal portfolio pretty locked down and track it with a very detailed and fairly obsessive spreadsheet. It breaks downs stock and bonds to the % we want, and then within stocks tracks domestic (further broken into small and large cap) and international (broken into emerging and developing, though I admittedly pay little attention to that and thus far it has mostly just worked out), and bonds are broken down to TIPS and nominal bonds.
I generally check it quarterly to make sure things aren't going too far off the rails, and then annually do a rebalance which coincides with husband adjusting his TSP contributions for the year by changing the amount based on annual limits and changing the funds to which the money goes, which effectively rebalances us going forward.
This year, a couple categories have moved further out of balance than usual. Small cap got pretty high. I've changed his TSP contributions to remove nearly all small cap for 2018 and adjusted our ROTH contributions as well, which I project will put us back to within 0.5% (of total invested) of where we want to be by the end of 2018, but that is of course if the market and all our funds stay exactly where they are right now.
I'm trying to decide if I should actually sell some of the small caps, or just let things rebalance over time, and it got me wondering what everyone else does. What are your thresholds for rebalancing? Do you do that with selling, or simply adjusting future contributions (or do you have a specific threshold for each)? How often do you check? In general, what is your system?
(Currently, we actively invest in 5 TSP funds and 3 Vanguard funds, but we have money in a few other funds as well, like a TIPS fund, where I occasionally throw some money if things get too far off in those categories.)