Rebalancing a non-PP portfolio...

[Professor Disorientation]

I have been doing some research about how often to rebalance a non-PP. The simple solution is to rebalance once a year. But the best results seem to be when you rebalance quarterly. Rebalancing quarterly does have an appeal to me. Rebalancing monthly doesn't appeal to me. Any thoughts?

Michael

[Kbg]

It depends on several things. Two big ones are the type of system you are trading/investing in and the tax consequences. Add some more detail and perhaps some better advice would be forthcoming.

[Professor Disorientation]

Both of the accounts are in IRAs. No immediate tax consequences. But I want to keep commissions within a reasonable level.
From what I read, quarterly rebalancing works best. I have 5 ETFs in one account and 4 in the other.

Michael

[Kbg]

As a general (mathematical) rule rebalancing works best with volatility and performs worse with trending assets. Rebalancing profits from harvesting volatility and rebalancing subtracts from the profit potential of a good trend. I have no idea what assets you have but theoretically one can have the best of both worlds.  Pick something that measures/tracks a trend and when the trend following device says sell, rebalance at that point.

If you have something that doesn't trend and is highly volatile well quarterly is probably not enough. In this case normally folks will rebalance at a statistical extreme.

So...it just depends.  However, I will say if you are using a PP/PP assets my backtesting indicates annual is the way to go (or bands).

[jafs]

Vanguard did an interesting study, and their results/conclusions were that re-balancing annually, but only if re-balancing bands were breached offered the best risk/reward outcomes.