Asset Allocation Re-balancing Math: Help Needed

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bennettg
Posts: 44
Joined: Sat Aug 06, 2016 8:28 am

Asset Allocation Re-balancing Math: Help Needed

Post by bennettg » Thu May 18, 2017 9:41 am

Hello,

I am trying to create a spreadsheet to help me rebalance monies in my retirement account in the New York State Deferred Compensation Plan (DCP). There are 2 components to the plan.....the main fund offerings and a self-directed option (known as a SDO or PCRA) with schwab.

My desired asset allocation when rebalancing is:

US Bonds (VBMPX): 20%
US Equity Large Cap (VIIIX): 48.6%
US Equity Mid Cap (VMCPX): 2.4%
US Equity Small Cap (VSCPX): 9%
International Equity (SWISX): 20%

The only thing i use the schwab SDO/PCRA for is SWISX which I want to be 20% of my overall asset allocation, which leaves 80% in the main (DCP).

When rebalancing, it is easy for me to take 20% of my entire retirement account and make sure that is what is in the SDO/PCRA for International Equity. But then I need to rebalance within the main part of the DCP. When I create a spreadhseet tab for a within main DCP rebalancing, is the math 0.80*desired overall AA? For example, would
1. VIIIX's desired asset allocation by percent within the main DCP be calculated as 0.80*0.486
2. VMCPX's desired asset allocation by percent within the main DCP be calculated as 0.80*0.024
3. VSCPX's desired asset allocation by percent within the main DCP be calculated as 0.80*0.09 and
4. VBMPX's desired asset allocation by percent within the main DCP be calculated as 0.80*0.20

Thanks in advance for any math help you might provide.

GLState
Posts: 126
Joined: Wed Feb 15, 2017 10:38 am

Re: Asset Allocation Re-balancing Math: Help Needed

Post by GLState » Thu May 18, 2017 10:20 am

Combine the values of both accounts. Then multiply the desired allocation for each symbol by the total dollar amount. If you have a total of $10000 in both accounts, your rebalancing targets would be as below:

Code: Select all

VBMPX	0.200	$2,000.00
VIIIX	0.486	$4,860.00
VMCPX	0.024	$240.00
VSCPX	0.090	$900.00
SWISX	0.200	$2,000.00
		
TOTAL	1.000	$10,000.00

rkhusky
Posts: 5159
Joined: Thu Aug 18, 2011 8:09 pm

Re: Asset Allocation Re-balancing Math: Help Needed

Post by rkhusky » Thu May 18, 2017 10:43 am

Can you move funds back and forth between SDO and DCP? If not, if will be difficult to rebalance with your current setup. If yes, then compare the equivalent of the last column in GLState's table with your current fund balances and move money from the funds that have too much to the funds that have too little.

EHEngineer
Posts: 686
Joined: Sat Feb 28, 2015 4:35 pm

Re: Asset Allocation Re-balancing Math: Help Needed

Post by EHEngineer » Thu May 18, 2017 11:13 am

GLState wrote:Combine the values of both accounts. Then multiply the desired allocation for each symbol by the total dollar amount. If you have a total of $10000 in both accounts, your rebalancing targets would be as below:

Code: Select all

VBMPX	0.200	$2,000.00
VIIIX	0.486	$4,860.00
VMCPX	0.024	$240.00
VSCPX	0.090	$900.00
SWISX	0.200	$2,000.00
		
TOTAL	1.000	$10,000.00
+1, that's the target.

I also find it helpful to keep track of "actuals" for comparison.
Or, you can ... decline to let me, a stranger on the Internet, egg you on to an exercise in time-wasting, and you could say "I'm probably OK and I don't care about it that much." -Nisiprius

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