Blueprint: Rebalancing

Comments

1. Barry Gray says:

   May 31, 2012 at 2:27 pm

   Excellent post, Darrow!
2. Early Retired Engineer says:

   May 31, 2012 at 3:02 pm

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

   May 31, 2012 at 3:04 pm

   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:

   June 1, 2012 at 4:56 am

   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:

   June 2, 2012 at 12:53 am

   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:

   June 2, 2012 at 2:17 am

   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."