How often should we rebalance our portfolios?

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asked Dec 05, 2014 10:26 PM by
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Hi Jin

I'm new to investing and would like to know when we should be checking in to re-balance our portfolios


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answered Dec 06, 2014 02:28 PM by
Jin Won Choi gravatar image Administrator

Hi Wailan, good question.

I designed and operate the regular portfolios so that only an annual rebalance is necessary. I anticipate that I will update the portfolios significantly maybe once every year to adjust for changes in the investment landscape. For example, I may decide to add a Canadian stock ETF to the portfolios once I feel that Canadian stocks are cheap enough. I will email members about the changes once they happen.

That said, many people effectively end up rebalancing their portfolios just by adding new savings every month. For example, if the international stock ETF goes down, rebalancing the portfolio may call for buying more of the ETF. In that case, adding new savings and buying international stocks with them will be like rebalancing.

I've designed the Premium portfolios on the other hand, with more frequent rebalancing in mind. The fortunes and prices of individual stocks change much more quickly, which leads to more frequent updates of the portfolios.

I hope that answers your question, Jin

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answered Dec 08, 2014 07:55 PM by
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(This is not an answer, but I was unable to type more than 300 words in the Comments text box.)

Hi Jin,

I want to make sure that I understand your comment on continuous rebalancing e.g., investing savings on a monthly "contribution" plan. Suppose that I budget $500/month for investing, to be spread across TFSA and RRSP accounts under my name and my wife's name. In the month of November, ETF A is considered a better buy than ETF B, and in December, the converse is true. Should I purchase $500 of ETF A in November and $500 of ETF B in December? Or, should I try not to be savvy and just stick with the pre-defined ratio for my portfolio on a monthly basis?

I will regularly encounter this problem, and I would like to know how much thought to put into the distribution of investments on a monthly basis.

Thanks, matt

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Hi Matt, many studies have shown that the short term fluctuation of ETF prices is random. Therefore, it wouldn't make sense to pick a 'better' ETF on a month to month basis. I would stick with the pre-defined ratios instead. Note that there are tools to help you do that in the model portfolios page.

Jin Choi ( Dec 08, 2014 09:40 PM )edit

Thanks Jin!

mmikitka ( Dec 09, 2014 06:53 PM )edit
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Asked: Dec 05, 2014 10:26 PM

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Last updated: Dec 08 '14

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