Steps how to rebalance?
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Steps how to rebalance?
OK basic question here - I seem to have misplaced Craig's book otherwise would look up. On the mechanics of rebalancing. If for example using the 15% or 35% bands and you have an infusion of cash to invest, I believe the book says to first put the money into your cash bucket. Once that bucket hits 35% you infuse the "poorest performance" bucket, which presumably would be the bucket that has the lowest band % at that point? You then add cash until that bucket hits 35%? Then I assume you move on to the next lowest band % and so on. I am trying to wrap my head around how to calculate this since as you add money, all the %s are affected. But of course if you do this in each bucket, maxing out around 34% by the 3rd bucket you have 3 buckets above 100%? The simpler more intuitive process would be to simply rebalance all buckets to 25% once any bucket hits a band limit?
Re: Steps how to rebalance?
I rebalanced last week - out of gold, bonds and cash, and into stocks. No special tricks with the timing, but the run-up in gold and bonds plus my latest cash contribution was just enough to knock the stock % down to the band limit. Definitely make your cash contribution first, then calculate your asset %s and rebalance if and only if you have crossed a band.
It's a daunting task, especially if you're buying an asset you're afraid of and have multiple accounts with different tax treatments to deal with. I found it helpful to make a list of planned transactions, double check everything, and then carry them out mechanically. If you are tax loss harvesting at the same time, be super careful that you don't trip any of the wash sale rules.
Interesting how the PP hit rebalance territory thanks to the upswing in gold and bonds, but the Bogleheads 60/40 in my 403b didn't even come close. That's because there are no assets to counterbalance stocks - the total bond fund only dampens the downswing.
It's a daunting task, especially if you're buying an asset you're afraid of and have multiple accounts with different tax treatments to deal with. I found it helpful to make a list of planned transactions, double check everything, and then carry them out mechanically. If you are tax loss harvesting at the same time, be super careful that you don't trip any of the wash sale rules.
Interesting how the PP hit rebalance territory thanks to the upswing in gold and bonds, but the Bogleheads 60/40 in my 403b didn't even come close. That's because there are no assets to counterbalance stocks - the total bond fund only dampens the downswing.