How often should you rebalance?

AnotherJoe

ChopperST wrote: »

Quarterly wins in this article - http://www.marketwatch.com/story/the-right-way-to-rebalance-your-portfolio-2014-02-18

That article has a flaw though, it doesn't cover costs, which with tax and margin, could even for quarterly wipe out the advantage over yearly. It also doesn't test other timescales, such as 2 or 3 times a year. Quite a lot of variables to test but they could be estimated at least.

I think looking a few times a year and balancing maybe two or three times at most might be likely to be more optimal once you include those trading costs. Also of course depends how much rebalancing is done, if you need to sell and £100k of investments and take the hit on bid-offer, or £10k, or just buy £10k because you have some income or are topping up.

Thrugelmir

What's the value of your portfolio?

Morphoton

FWIW I do threshold rebalancing with the limits being set at +/-25%. This is on a portfolio of ~15 IT's/ETF's/individual gilts in my SIPP. The smallest weighting has a target of 4%, so if it goes outside the 3-5% range it is brought back into line. Most of the smaller target range funds are quite volatile so there can be a trade typically every 2-3 months. CoIncidently just rebalanced BRWM last week which had got too high.

LXdaddy

I use the 5/25 threshold rule to look at the balance. As I make regular investments each month I also change the allocation of new money so that it goes into underweight funds.. I don't change the allocation for the subscription more than two or three times a year.