Author Topic: When do you rebalance?  (Read 16549 times)

RedmondStash

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When do you rebalance?
« on: April 08, 2016, 08:40:44 PM »
I've just taken charge of our finances and moved our assets to Vanguard this year, so naturally I am checking on them constantly. :) I'll calm down soon.

But -- how do you determine when it's time to rebalance? I don't plan to do so more than maybe 1-2 times per year, but how big a deviation from your AA does there have to be to make rebalancing worthwhile? It makes sense if it's off by entire percentage points, but .5% or .2%? There are no trading fees for buying & selling the index funds we own at Vanguard, but constantly fussing at tiny deviations doesn't seem to make a lot of sense.

Just wondering how other folks handle this type of thing. Do you bother making adjustments if your balances haven't strayed that far from your AA? Or do you just do it like clockwork, on specific dates, regardless of how little the ratios have changed?

hodor

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Re: When do you rebalance?
« Reply #1 on: April 09, 2016, 02:28:32 AM »
Everyone is different, write down your target allocation ranges for each asset you place cash.

i.e.
Shares 40-60% and Bonds 40-60%

50% Shares and 50% bonds would be where you start and you might assess once or twice a year and re balance if required.

If you are adding funds this will help you re balance your portfolio too as you can place cash in the assets you are light on.

What are your desired ranges?

georgicus

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Re: When do you rebalance?
« Reply #2 on: April 09, 2016, 02:52:54 AM »
Once or twice a year is good. 

You don't want to do it too often, or you lose the benefit of the differences in growth rates altogether.  The  general rule is not to bother unless you get "unbalanced" by at least 5%.

misshathaway

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Re: When do you rebalance?
« Reply #3 on: April 09, 2016, 08:02:10 AM »
FWIW Vanguard Advisor advice is every 3 months if the difference is 5% or greater.

BookWorm22

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Re: When do you rebalance?
« Reply #4 on: April 09, 2016, 08:35:37 AM »
Twice a year for me.  Just pick dates or times of year that will be easy for you to remember. 

matchewed

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Re: When do you rebalance?
« Reply #5 on: April 09, 2016, 08:37:09 AM »
Write an investment policy statement, then follow that.

Usually based on a time (once or twice a year) and/or on a deviation from the allocation so you can stay on target.

PhysicianOnFIRE

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Re: When do you rebalance?
« Reply #6 on: April 09, 2016, 08:45:21 AM »
I make a monthly investment into a taxable account that has both domestic and international stock index funds, and biweekly investments into my 401(k) which contains domestic stock index funds and a bond fund.

I rebalance with the routine investments.  That is, I invest in the asset class that is below my desired allocation.  Occasionally, I'll make an exchange within the Roth account when an asset class gets out of whack (like REIT, which only sees new money when I do backdoor Roths in January).  Maybe 2 to 3 times per year at the most.

Heckler

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Re: When do you rebalance?
« Reply #7 on: April 09, 2016, 09:03:03 AM »
Once per year in March, if it's more than 5% off, but since I pay $9.95 per ETF trade, I really try to avoid selling and instead use contributions to bring things back in line throughout the year. 

Today, I am 1-3% off target for each of my 6 holdings, and haven't sold any in two years.
« Last Edit: April 09, 2016, 10:02:26 AM by Heckler »

ender

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Re: When do you rebalance?
« Reply #8 on: April 09, 2016, 10:38:24 AM »
Twice a year for me.  Just pick dates or times of year that will be easy for you to remember.

My "rebalance date" is my birthday for this reason.


We have enough now that we really ought to to get an IPS written though.

RedmondStash

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Re: When do you rebalance?
« Reply #9 on: April 09, 2016, 10:52:24 AM »
This is awesome. Thanks, everyone! I like that 5% guideline.

My Google-fu failed me when I tried to find articles about rebalancing online -- I just found articles about determining AA and what "rebalancing" means -- so I appreciate the help.

Because we're still employed, we do still contribute to our retirement accounts, and I do use those contributions to rebalance a bit. That'll probably suffice for now, and I can make any additional necessary adjustments annually or semi-annually.

Kaspian

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Re: When do you rebalance?
« Reply #10 on: April 11, 2016, 08:20:51 PM »
Start of January, end of June, or whenever I have extra money to throw in.  No deviations or tinkering or fucking about because I'm bored allowed!  If I feel the need to randomly screw with my portfolio, instructions are to stick a finger in an electric pencil sharpener while facepunching myself with the other hand.

That said, was all prepared to rebalance January 1st this year, markets took an explosive dump all over the place at opening bell, and I backed slowly out of the room.  Rebalance will have to wait until end of June.

Maybe EVERYBODY is now rebalancing at the beginning of January and I should shift the 6-month period?  ...But that too seems like tinkering with my Investment Poilcy.

matchewed

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Re: When do you rebalance?
« Reply #11 on: April 12, 2016, 05:25:17 AM »
Start of January, end of June, or whenever I have extra money to throw in.  No deviations or tinkering or fucking about because I'm bored allowed!  If I feel the need to randomly screw with my portfolio, instructions are to stick a finger in an electric pencil sharpener while facepunching myself with the other hand.

That said, was all prepared to rebalance January 1st this year, markets took an explosive dump all over the place at opening bell, and I backed slowly out of the room.  Rebalance will have to wait until end of June.

Maybe EVERYBODY is now rebalancing at the beginning of January and I should shift the 6-month period?  ...But that too seems like tinkering with my Investment Poilcy.


Interesting.

Why did you let market volatility dictate your actions instead of your plan?

Kaspian

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Re: When do you rebalance?
« Reply #12 on: April 12, 2016, 08:58:44 AM »

That said, was all prepared to rebalance January 1st this year, markets took an explosive dump all over the place at opening bell, and I backed slowly out of the room.  Rebalance will have to wait until end of June.

Maybe EVERYBODY is now rebalancing at the beginning of January and I should shift the 6-month period?  ...But that too seems like tinkering with my Investment Poilcy.


Interesting.

Why did you let market volatility dictate your actions instead of your plan?

I guess because once "the dump" happened at the start of January, rebalancing wasn't worth it this time around?  It was still close enough in-line with the rebalancing I'd done in June.  Though equities were high in December, things weren't off by enough percentage points by January that there'd be any real benefit to the effort involved in moving money to bonds or elsewhere.  It would have been pretty much negligible.

capitalninja

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Re: When do you rebalance?
« Reply #13 on: April 12, 2016, 10:09:41 AM »
I rebalance through adding new money. I never sell any of my securities for that purpose.

seattlecyclone

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Re: When do you rebalance?
« Reply #14 on: April 12, 2016, 10:52:05 AM »
I keep a Google spreadsheet that I keep updated with share counts as I buy more, and the price updates itself. It shows current balances by asset class. When an asset class gets more than 5% away from the target allocation I'll take some action to fix it.

Ox05

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Re: When do you rebalance?
« Reply #15 on: April 12, 2016, 06:31:46 PM »
Betterment makes it super easy and *constantly* re-balances with EVERY dollar you invest, whether through deposits of fractional shares or reinvestment of dividends in under-performing assets. The constantly well-allocated portfolio, complex tax-loss harvesting (for my non-retirement accounts), and the lack of cash drag are what make it my platform of choice, outside of the TSP.

Give it a serious look. The fees are pretty low.

Note sure if this is allowed, and you should investigate it seriously either way, but here's my referral link: betterment.com/invite/evanoxhorn

In the alternate, MMM has a post on the service, I believe, and you can click through his referral.

Simply put, it's the best 90% solution around.

Interest Compound

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Re: When do you rebalance?
« Reply #16 on: April 13, 2016, 10:34:48 AM »
Betterment makes it super easy and *constantly* re-balances with EVERY dollar you invest, whether through deposits of fractional shares or reinvestment of dividends in under-performing assets. The constantly well-allocated portfolio, complex tax-loss harvesting (for my non-retirement accounts), and the lack of cash drag are what make it my platform of choice, outside of the TSP.

Give it a serious look. The fees are pretty low.

Note sure if this is allowed, and you should investigate it seriously either way, but here's my referral link: betterment.com/invite/evanoxhorn

In the alternate, MMM has a post on the service, I believe, and you can click through his referral.

Simply put, it's the best 90% solution around.

Vanguard has portfolios that *constantly* rebalance EVERY dollar you invest, and they don't charge a fee for it. The total portfolio fee ends up being less than half that of Betterment.

P0IS0N

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Re: When do you rebalance?
« Reply #17 on: April 13, 2016, 10:43:12 AM »
I keep a Google spreadsheet that I keep updated with share counts as I buy more, and the price updates itself. It shows current balances by asset class. When an asset class gets more than 5% away from the target allocation I'll take some action to fix it.
I keep a Google spreadsheet that updates my portfolio from yahoo finance. It can recommend re-balancing action, based on desired allocation and estimated transaction value. I essentially re-balance every time I invest.

Interest Compound

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Re: When do you rebalance?
« Reply #18 on: April 13, 2016, 10:43:42 AM »
I don't rebalance my portfolio. I don't have to. It rebalances for me, and I'm not charged any extra fees for it either :)

The total Expense Ratio (fee) on the portfolio is 0.085% a year. A pretty good deal.

MustacheAndaHalf

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Re: When do you rebalance?
« Reply #19 on: April 14, 2016, 12:27:42 AM »
I keep a Google spreadsheet that updates my portfolio from yahoo finance. It can recommend re-balancing action, based on desired allocation and estimated transaction value. I essentially re-balance every time I invest.
I think of Google and Yahoo as competitors for search results.  I'm curious what you do to pull data from Yahoo Finance into Google spreadsheets.  I've been using GOOGLEFINANCE() to lookup data (in Google Drive, file type "Sheet").

P0IS0N

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Re: When do you rebalance?
« Reply #20 on: April 16, 2016, 09:24:42 AM »
I keep a Google spreadsheet that updates my portfolio from yahoo finance. It can recommend re-balancing action, based on desired allocation and estimated transaction value. I essentially re-balance every time I invest.
I think of Google and Yahoo as competitors for search results.  I'm curious what you do to pull data from Yahoo Finance into Google spreadsheets.  I've been using GOOGLEFINANCE() to lookup data (in Google Drive, file type "Sheet").
My bad, I meant Excel. Sorry.

Jim2001

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Re: When do you rebalance?
« Reply #21 on: April 16, 2016, 12:37:19 PM »
+1 for re-balance with new contributions to the extent possible, otherwise re-balance once per year within the tax deferred account.

I wish I still had the research from around 2010, but at least I remember the output. Re-balancing twice a year hurt the overall yield slightly when compared to re-balancing once per year.  No, I don't have the data or links to back that up.  I believe it assumed the dividends were re-invested in the original holding.

Maybe somebody who has the tools to back test this can run some new research and report what they find.

RedmondStash

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Re: When do you rebalance?
« Reply #22 on: April 16, 2016, 01:53:29 PM »
+1 for re-balance with new contributions to the extent possible, otherwise re-balance once per year within the tax deferred account.

I wish I still had the research from around 2010, but at least I remember the output. Re-balancing twice a year hurt the overall yield slightly when compared to re-balancing once per year.  No, I don't have the data or links to back that up.  I believe it assumed the dividends were re-invested in the original holding.

Maybe somebody who has the tools to back test this can run some new research and report what they find.

Good to know. Thanks, Jim. Yeah, I've been automatically doing any necessary rebalancing in a tax-deferred account, but without really thinking about it. It makes sense to make that a conscious plan.

johnny847

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Re: When do you rebalance?
« Reply #23 on: April 16, 2016, 02:14:50 PM »
I don't rebalance because I never have to. I have my portfolio set up with 100% stocks and pegged to market weight for US vs international.

Travis

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Re: When do you rebalance?
« Reply #24 on: April 16, 2016, 05:16:42 PM »
I've noticed my AA balance slipping the last few months, but it's difficult to quantify why since I'm front-loading my TSP and Roths (could be performance, could be contributions).  My AA is 20/20/60 bond/international/domestic, but right now it's more like 17.5/18.5/64.  This year I'll stop adding to TSP (bond/domestic) on my 30 June paycheck and both Roths are already done (domestic), so I'll rebalance then depending how things look.  The rest of my taxable contributions for the year will probably end up going international to help with the rebalance.  It's some fuzzy math I haven't quite figured out yet.

Interest Compound

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Re: When do you rebalance?
« Reply #25 on: April 17, 2016, 06:43:59 AM »
I don't rebalance because I never have to. I have my portfolio set up with 100% stocks and pegged to market weight for US vs international.

+1

One less thing to worry about.

RedmondStash

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Re: When do you rebalance?
« Reply #26 on: April 17, 2016, 08:49:19 AM »
I don't rebalance because I never have to. I have my portfolio set up with 100% stocks and pegged to market weight for US vs international.

+1

One less thing to worry about.

Out of curiosity, do you plan to change that 100% AA when you're retired?

johnny847

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Re: When do you rebalance?
« Reply #27 on: April 17, 2016, 08:51:49 AM »
I don't rebalance because I never have to. I have my portfolio set up with 100% stocks and pegged to market weight for US vs international.

+1

One less thing to worry about.

Out of curiosity, do you plan to change that 100% AA when you're retired?

Nope

Interest Compound

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Re: When do you rebalance?
« Reply #28 on: April 17, 2016, 01:43:32 PM »
I don't rebalance because I never have to. I have my portfolio set up with 100% stocks and pegged to market weight for US vs international.

+1

One less thing to worry about.

Out of curiosity, do you plan to change that 100% AA when you're retired?

Nope

TheAnonOne

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Re: When do you rebalance?
« Reply #29 on: April 19, 2016, 01:00:13 PM »
I don't rebalance because I never have to. I have my portfolio set up with 100% stocks and pegged to market weight for US vs international.

+1

One less thing to worry about.

Out of curiosity, do you plan to change that 100% AA when you're retired?

Nope

I am with you, 100% stocks all the time for life.

Overshoot the 4% rule a bit and you won't need to worry about the right-after-FIRE-crash incident.


johnny847

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Re: When do you rebalance?
« Reply #30 on: April 19, 2016, 01:45:04 PM »
I don't rebalance because I never have to. I have my portfolio set up with 100% stocks and pegged to market weight for US vs international.

+1

One less thing to worry about.

Out of curiosity, do you plan to change that 100% AA when you're retired?

Nope

I am with you, 100% stocks all the time for life.

Overshoot the 4% rule a bit and you won't need to worry about the right-after-FIRE-crash incident.

The 4% rule already takes into account the right after FIRE crash.

Ursus Major

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Re: When do you rebalance?
« Reply #31 on: April 19, 2016, 08:15:50 PM »
The 4% rule already takes into account the right after FIRE crash.

I might be missing something here, but wasn't the 4% rule (e.g. the original Trinity study and it's follow-ups) done with a portfolio that had a noteworthy bond allocation?

johnny847

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Re: When do you rebalance?
« Reply #32 on: April 19, 2016, 08:34:36 PM »
The 4% rule already takes into account the right after FIRE crash.

I might be missing something here, but wasn't the 4% rule (e.g. the original Trinity study and it's follow-ups) done with a portfolio that had a noteworthy bond allocation?

No.

The original Trinity study.


What's your point exactly?