Rebalancing – July 2021

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.

African elephant female and her baby elephant balancing on a blue balls.

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.

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Mr. 39 Months

2 thoughts on “Rebalancing – July 2021”

  1. I recently did an adjustment of my asset allocation as I get nearer to retirement. I did my rebalance tied to that adjustment. Historically in the accumulation phase I’ve used new contributions to drive rebalancing. I’m starting to get to the point where contributions are no longer significant enough to drive allocation rebalancing. I’m leaning towards the percentage method you reference here with a 5 percent band, so I readjust when I am off my allocation by 5 percent.

    1. That is one of the key inflection points with FI – the transition from accumulation to expenditure. My allocation still only has 20% bonds (for safety) and I may keep it there for a while after we retire, since the returns are so low right now. Still, we’ve reached the point where our allocation has some changes coming soon. thanks for the comment!

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