How Often to Look for Rebalancing Opportunities?

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Buddtholomew
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How Often to Look for Rebalancing Opportunities?

Post by Buddtholomew »

Some asset classes are more volatile than others and have the potential to trigger rebalancing bands more frequently. How do others strike a balance between looking too often or not often enough and missing out on these rebalancing opportunities?

I refreshed snapshots of old excel spreadsheets and noticed that I would have missed several opportunities to rebalance if I went a year without restoring allocations.
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
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Aptenodytes
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Re: How Often to Look for Rebalancing Opportunities?

Post by Aptenodytes »

What does "too often" mean?
livesoft
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Re: How Often to Look for Rebalancing Opportunities?

Post by livesoft »

I look every day. It literally takes less than half a second of time. There will be no rebalancing opportunities unless something moves significantly such as 3% or more in one day. Such a movement turns out to be very noticeable. Sometimes it is fleeting such as on May 6, 2010.
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John3754
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Re: How Often to Look for Rebalancing Opportunities?

Post by John3754 »

Rebalancing is not about looking for "opportunities".
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Buddtholomew
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Re: How Often to Look for Rebalancing Opportunities?

Post by Buddtholomew »

John3754 wrote:Rebalancing is not about looking for "opportunities".
Rebalancing restores a portfolio to its target risk/reward profile. I would like to reduce the frequency I look at the portfolio, but not at the expense of allowing the risk/reward relationship to fluctuate out of tolerance bands.

Time to refresh and check balances is not the issue. This takes seconds.
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
chuppi
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Re: How Often to Look for Rebalancing Opportunities?

Post by chuppi »

I found an interesting thread on the topic. There are a lot of material on the topic. I also want to decide on a strategy.
http://www.bogleheads.org/forum/viewtopic.php?t=63015

I have a question for the OP. You said that it takes seconds to check your accounts. Do you use any tools to check? Between me and my wife, we have two fidelity 401K accounts, one joint vanguard account and two ROTH on vanguard. Wondering if there is a way to get a quick view and overall asset allocation.
Thanks
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Aptenodytes
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Re: How Often to Look for Rebalancing Opportunities?

Post by Aptenodytes »

Buddtholomew wrote:
John3754 wrote:Rebalancing is not about looking for "opportunities".
Rebalancing restores a portfolio to its target risk/reward profile. I would like to reduce the frequency I look at the portfolio, but not at the expense of allowing the risk/reward relationship to fluctuate out of tolerance bands.

Time to refresh and check balances is not the issue. This takes seconds.
In your original post you said you wanted to check more often. Now it is less often. Maybe you just worry too much.
dbr
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Re: How Often to Look for Rebalancing Opportunities?

Post by dbr »

For most portfolios most of the time actual rebalancing probably happens less often than once a year or every couple of years, using a 25/5 band scheme, for example. You don't have to look and figure things out very frequently to keep up with that, and missing an "opportunity" by a couple of weeks, or even months, is no big deal anyway.

Lots of people have spread sheets where the results are calculated more or less automatically, and there are ways to automatically refresh data for anything that has a ticker symbol. Some inputs may still have to be manual transfer from account web pages.
LittleD
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Re: How Often to Look for Rebalancing Opportunities?

Post by LittleD »

I don't think there's much benefit to trying to rebalance too many times a year. I think
just pick a useful strategy to do it once or twice a year and add that time to you IPS.
For me, I just do it the 1st week of April and the 1st week of October. Seems to work well
over the last 25 years or so. No telling if that will work into the future though. More times
than that will probably not add much in value to the portfolio and could actually cost if you
have significant trading costs.
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cheese_breath
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Re: How Often to Look for Rebalancing Opportunities?

Post by cheese_breath »

I update my financial planning spreadsheet with my new account balances first day of each month. I rebalance if the numbers show I'm out of my AA bands, otherwise I don't.
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kaudrey
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Re: How Often to Look for Rebalancing Opportunities?

Post by kaudrey »

I look quarterly to see how I am doing. Unless there are huge swings in the stock market, it is unlikely I'll go outside my bands in 3 months. And then, I usually rebalance by changing my going-forward allocation, as compared to selling and buying immediately.
John3754
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Re: How Often to Look for Rebalancing Opportunities?

Post by John3754 »

Buddtholomew wrote:
John3754 wrote:Rebalancing is not about looking for "opportunities".
Rebalancing restores a portfolio to its target risk/reward profile. I would like to reduce the frequency I look at the portfolio, but not at the expense of allowing the risk/reward relationship to fluctuate out of tolerance bands.

Time to refresh and check balances is not the issue. This takes seconds.
I check on my portfolio quarterly and rebalance twice a year. I suppose if things got seriously out of whack I could rebalance quarterly but it's generally not a problem and I wouldn't want to tinker with in much more than that personally. Checking often for a rebalancing "opportunity" is veiled market timing to me and I dont believe it to be particularly useful.
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Don Christy
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Re: How Often to Look for Rebalancing Opportunities?

Post by Don Christy »

Are you really thinking more about missing an opportunity to tax loss harvest (TLH)?

If you're really concerned about missing rebalancing opportunities, consider a target date or lifestyle fund that automatically rebalances. Otherwise, TLH not withstanding, IMO, due to momentum and other factors, there's probably little reason (i.e. no benefit) to rebalance more than once a year and/or by using relatively large rebalancing bands.

Don
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nisiprius
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Re: How Often to Look for Rebalancing Opportunities?

Post by nisiprius »

William J. Bernstein wrote:Is there any reason to believe that, on average, rebalancing will help more than it hurts? Not if we believe that market movements are random. After all, we rebalance with the hope that an asset with past higher/lower than average returns will have future lower/higher than average returns.

Is this actually true? Probably. Recall that over short periods of time asset classes display momentum, but that over periods of time over a year or longer tend to mean-revert....

Rebalance your portfolio approximately once every few years; more than once per year is probably too often. In taxable portfolios, do so even less frequently.
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midareff
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Re: How Often to Look for Rebalancing Opportunities?

Post by midareff »

Gropes & Ray
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Re: How Often to Look for Rebalancing Opportunities?

Post by Gropes & Ray »

This is probably because my portfolio isn't particularly large yet, but I rarely find that I'm off of my AA by very much. I'm also purchasing new investments twice a month, so I can simply choose to buy more bonds if that is what I need to do to rebalance.
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Buddtholomew
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Re: How Often to Look for Rebalancing Opportunities?

Post by Buddtholomew »

Aptenodytes wrote:
Buddtholomew wrote:
John3754 wrote:Rebalancing is not about looking for "opportunities".
Rebalancing restores a portfolio to its target risk/reward profile. I would like to reduce the frequency I look at the portfolio, but not at the expense of allowing the risk/reward relationship to fluctuate out of tolerance bands.

Time to refresh and check balances is not the issue. This takes seconds.
In your original post you said you wanted to check more often. Now it is less often. Maybe you just worry too much.
Maybe you should reread the posts.

Some assets are more volatile than others even over a 3-month timeframe. Look at GDX - PM&M as an example. I agree that total market portfolios exhibit much less drift as daily fluctuations of 3% are rare. Not so much for GDX and in some periods EM. If I hold these assets am I required to look more frequently?
"The first principle is that you must not fool yourself and you are the easiest person to fool" --Feynman.
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Aptenodytes
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Re: How Often to Look for Rebalancing Opportunities?

Post by Aptenodytes »

Buddtholomew wrote: Maybe you should reread the posts.

Some assets are more volatile than others even over a 3-month timeframe. Look at GDX - PM&M as an example. I agree that total market portfolios exhibit much less drift as daily fluctuations of 3% are rare. Not so much for GDX and in some periods EM. If I hold these assets am I required to look more frequently?
I did reread the posts. The first wonders if you should have checked more often; the later one wonders if you should check less often.

Anyway, the more volatile your holdings, the more often you want to check, other things being equal.

I'd say if you are checking weekly or more frequently, you don't need to worry, no matter what your holdings are. If you are checking less often than weekly, you probably want to look at the volatility and think about increasing the frequency. You've never told us how often you check, so we don't know if we should advise you to increase or not.

If you really have a distaste for checking balances you probably don't want to be in volatile assets to begin with. If you don't have a distaste for it, it is a non-issue.

I get the sense that the question needs to be sharpened a bit -- I still don't know what you are after.
placeholder
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Re: How Often to Look for Rebalancing Opportunities?

Post by placeholder »

About once a month I update my spreadsheet and let it do its thing which generally results in no action although I'll also look to see how much cash has accumulated and use the relative balances to direct any new purchases.
Dandy
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Re: How Often to Look for Rebalancing Opportunities?

Post by Dandy »

I think most people should check their portfolio frequently - even if it is to make sure it is still there. If checking makes you take action or worry too much that is a different story. I check to make sure I understand how the market affects my different holdings as well as to make sure it is still there.

I try to limit my re balancing to once a year. I am mostly concerned with the equity vs fixed income allocation. I have tight band on equity increases and will take money out of equities sooner when the market is hot. I have a larger band/tolerance on the decrease in equity holdings so when the equity market is down I usually take no action unless it is several % below my target. So in 2013 I made several moves out of equities but none so far in 2014.

The sub allocations usually are adjusted once a year.
livesoft
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Re: How Often to Look for Rebalancing Opportunities?

Post by livesoft »

chuppi wrote:I have a question for the OP. You said that it takes seconds to check your accounts. Do you use any tools to check? Between me and my wife, we have two fidelity 401K accounts, one joint vanguard account and two ROTH on vanguard. Wondering if there is a way to get a quick view and overall asset allocation.
Thanks
I have all my assets from about 8 different accounts entered manually into 3 free online tools:
1. Vanguard Portfolio Watch
2. Fidelity Guided Portfoloio Summary
3. Morningstar Portfolio Manager

All of them will show one's asset allocation. See this thread: http://www.bogleheads.org/forum/viewtop ... 6#p2098366

Since you have Fidelity accounts, I would recommend that you use the Fidelity GPS which is a great way to get a quick view and overall asset allocation. It is really really easy. Just enter all the investments in all your accounts in a structured way manually into the Fidelity GPS tool, then click away.
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