I’ve written before about performing regular rebalancing of your investments. This makes you sell off your items which have become too much of your allocation due to increase, and purchase of items that are low in your allocation, due to decrease in value – basically buying low and selling high. I usually do this fairly regularly, every six months.
Since rebalancing does incur some costs, you don’t want to rebalance too frequently – but you do want to do it. Recently, I’ve read several articles on the subject (including this one from thebalance). The suggestion from many of them is not to do it on a specific, regular date, but when your portfolio shifts in a significant amount – usually 20% above your allocation or more (i.e. if you have your S&P allocation of your portfolio be 25%, when it is either goes up to 30% or down to 20% of your allocation, then it would be time to rebalance).
I’ve rebalanced fairly regularly every six months, but I thought I’d give it a try for 2021 and 2022. At this point, my allocation hasn’t shifted enough to be 20% off for any of my asset classes.
I’ll let folks know when it does.
Mr. 39 Months