How to distribute monthly contributions?

[robininni]

I am about to get started with the PP however I am wondering what the best way to handle periodic contributions is.

I have pondered two ways:

1.  Split monthly (or quarterly maybe) contributions in equal 25% blocks to be put in each allocation of the PP regardless of the current percent value of the PP and then only worry about rebalancing once a year.

2.  Split contributions according to the current percent value of the PP so that the assets with less than 25% allocation based upon the current value get the new funds.

Also, on the rebalancing the PP, is it best to do it only once a year or should it be done at anytime one portion reaches the 15% or 35% line?  If only once a year, should it always be rebalanced each year or only if one of the assets reaches the 15% or 35% line?

Thanks,

Rob

[PFG]

I like to keep things simple, so I contribute with your idea on #1. My monthly contributions go in 4x4, then I re-balance as needed.

[tnt]

Robininni, it would depend on how much you are putting in and where your percentages are at the time.  For instance, if you have an asset down enough to absorb your contribution and nothing else is ready for sale or addition, then you add to that one.  The foundation of PP being to buy the asset that is lowest and after that is done, spreading equally.  if you dump the money equally without consideration for the percentages then you may end up trading again soon to rebalance.

[mgtow]

The bank I deal with has a set of index mutual funds with very low MER.  They pretty much track the same as the ETFs I plan to buy, so I figure I will deposit money into those until it's worthwhile to pay the brokerage fee to buy the equivalent ETF.

This of course depends on how big your contribution is relative to your current holdings.  I'm pretty sure the Harry Browne way is to just contribute to the Cash portion until it hits the rebalancing band of 35%.

[blackomen]

In the beginning, just transfer the cash in and if cash hits a rebalancing band, do it (and restore to 25/25/25/25.)

When you've been regularly contributing for a few years (like me), you can take your monthly distribution and use it to buy the lowest weight asset if there's a huge difference between its market value and your most overweight asset.  This saves on trading costs.  One might it might be gold and the next bonds (frequently the case last year.)

[Jay-UMN]

I just put cash in and re-balance once or twice a year.