Re: Re-Balancing the Portfolio
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Yeah, I am planning on adding more $ but it's gaining at a rate that is faster than I can add to the other funds. Thanks for the advice though.
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np...and just to give you an idea:
there are many backtesting studies that show the results over various time horizons of rebalancing annually, semi annually, monthly, weekly and daily.
taking into account transaction costs and maximizing the positive effects of rebalancing, most studies suggest monthly reblancing excluding tax effects. the overall benefit of monthly rebalancing for low turnover portfolios (depending on a bunch of factors) is 3-10%.
so if tax will eat a huge chunck (35%) then obviously you shouldn't reblanace by selling higher valued securities.
the logic of rebalancing is pretty much the opposite of the recently posted "why leverage funds suck" articles from seeking alpha.com
basically when you rebalance you sell high and buy low vs. maintaining constant leverage you sell low and buy high.
but you should rebalance with all additions since that is frictionless.
Barron
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