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Blueprint: Rebalancing


Portfolio Rebalancing Blueprint

 

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Comments

  1. Barry Gray says:

    Excellent post, Darrow!

  2. Early Retired Engineer says:

    Suggestion: somewhere in the taxable decision path you might throw in rebalancing in conjunction with tax loss harvesting.

  3. Darrow Kirkpatrick says:

    Thanks Barry. I expect to do many more of these diagrams. They're a good tool for summarizing the issues that we get into more deeply with the regular blog posts. Thanks again!

  4. Darrow Kirkpatrick says:

    ERE, thanks for pointing out the potential to rebalance as part of tax loss harvesting. I'll see if I can fit that into the next version of the diagram. Meanwhile I'm glad you brought it up, so others are reminded about that option. I appreciate the comment!

  5. Unsure Investor says:

    Hello, great diagram, thanks! One question about the 10% rule for triggering rebalancing. Suppose I want to be 70/30 stocks/bonds. Does this mean I should re-balance when:

    a. my portfolio goes to 80/20 or 60/40 ?

    or

    b. my portfolio goes to 77/23 or down to 63/27? (This illustrates that 10% of 70 is 7%).

    Thanks.

  6. Darrow Kirkpatrick says:

    Thanks Unsure. I appreciate somebody asking that question, since I probably haven't answered it directly yet. I think most of the experts speak about this in round numbers/absolute percents, meaning use an 80/20 – 60/40 band in your case, and that makes the math a bit simpler. But be advised that some mean "5% either direction" when they say "10%."

    But the bottom line is that it probably doesn't matter much, as long as you're consistent. Mike Piper in this article at Oblivious Investor says "Rather than spending a great deal of time and effort thinking about it, my suggestion is simply to pick one method and resolve to stick with it."