Best time to rebalance Bond ETF

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eggisme
Posts: 16
Joined: Thu Jun 23, 2016 8:34 am

Best time to rebalance Bond ETF

Post by eggisme » Mon Dec 04, 2017 11:42 am

Hi everyone,

As the end of the year is approaching I wanted to rebalance some of my bond ETFs as well as replace some of them With others.

I suddenly realized though that I'm not sure if there is a time where they give their interest/distribution/coupon in which case would it be worth doing that after that time?

Or is that just factored into the etf price?

The ones I want to sell are SHY, and a inflation protected one that aren't earning much and buy some more corporate bonds and intermediate term bond etfs.

Thanks!

livesoft
Posts: 62776
Joined: Thu Mar 01, 2007 8:00 pm

Re: Best time to rebalance Bond ETF

Post by livesoft » Mon Dec 04, 2017 11:45 am

I would suggest buying intermediate term bond ETFs when they drop by about 0.5% from the previous close. One can see how often this happens. They are going to go back up soon thereafter.

By the same token, one might wish to sell them when they go up by 0.5% from the previous close because they are going to back down soon thereafter.

The +-0.5% might happen only intraday like on last Friday or on the day before a FOMC announcement or the day of a FOMC announcement.

Also be sure to take into account any changes because the ETF went ex-dividend. That drop in price is not part of the 0.5%.
I suddenly realized though that I'm not sure if there is a time where they give their interest/distribution/coupon in which case would it be worth doing that after that time?

Or is that just factored into the etf price?
That is always factored into the price. Many bond ETFs went ex-dividend on 12/1.

Full disclosure: I bought some BND this morning. I will buy more bond ETF shares on the payable date of the early December dividend later this week.
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victw
Posts: 73
Joined: Sat Feb 20, 2016 4:07 pm

Re: Best time to rebalance Bond ETF

Post by victw » Mon Dec 04, 2017 2:55 pm

livesoft wrote:
Mon Dec 04, 2017 11:45 am
Full disclosure: I bought some BND this morning. I will buy more bond ETF shares on the payable date of the early December dividend later this week.
livesoft - did you sell equities to buy BND? If not - do you keep a reserve for this kind of activity? What percentage?

And yes - I realize I am probably not asking the right question.

Vic

livesoft
Posts: 62776
Joined: Thu Mar 01, 2007 8:00 pm

Re: Best time to rebalance Bond ETF

Post by livesoft » Mon Dec 04, 2017 3:08 pm

victw wrote:
Mon Dec 04, 2017 2:55 pm
livesoft - did you sell equities to buy BND? If not - do you keep a reserve for this kind of activity? What percentage?
I do not keep a reserve for this kind of activity.

I sold bonds on Friday when they went up by 0.5%. I bought equities on Friday when they dropped by 3% with some of the money. The rest of the money stayed in cash over the weekend. Bonds dropped from my selling price after I sold them on Friday and dropped today at the market open, but started to go up after I used the leftover cash to buy BND. So while BND appears to be down since Friday close, my purchase is up so far today.

And the equities I bought on Friday went up on Friday and continued to go up today. I may sell them today or tomorrow and buy more shares of BND because I have hit a rebalancing band.
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eggisme
Posts: 16
Joined: Thu Jun 23, 2016 8:34 am

Re: Best time to rebalance Bond ETF

Post by eggisme » Tue Dec 05, 2017 11:21 am

Thanks for your reply!

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