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I take the approach of rebalancing when adding new money. So instead of selling off existing portfolio holdings to rebalance, when it so happens that I have cash available, I simply add money to even out the proportions again.
 

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I monitor my asset allocation a few times a year (cuz I'm a nerd) but I rarely rebalance. Like Frugal Trader, I use new money or accumulated dividends and interest payments as an opportunity to rebalance.

The more often you rebalance, the more often you have to pay trading fees.
 

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That link provides a pretty good summary of opinions. Also look at the historical results from both rebalancing between Cdn/US equities and between Cdn debt and equity on sheets 14 and 15 of this spreadsheet.

I don't agree with the asset-allocation doctrine, so I don't rebalance. I just put my money where I think it will earn the highest return within my tolerance for risk. That changes over time. The need for rebalancing came to the media's attention when 'financial advisors' took over the role from stock brokers.
 

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I think about rebalancing once a year - sometimes more. :)

I'm going to rebalance by the end of this year (or early Jan) - haven't done it in about 1.5 years.

I used to think that you should only rebalance if your allocations get far enough out of whack but given the volatility we've experience in the last little while - if you followed that rule you would be constantly rebalancing.

Using contributions to rebalance is a great idea but once you get to the point where your contributions are a small portion of your portfolio then this is less effective.
 

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Anybody have any thoughts on rebalancing investment portfolios? I've been doing some research into this topic (see link below) and was wondering how often people rebalance, what approach they use, etc.
My advice, do what you feel most comfortable with. Some people need to do it regularly and systematically, others do it whenever they feel they are way off track.

Set yourself some guidelines (ie. Maximum % in stocks and Maximum % in individual position) then rebalance whenever you are out of whack with your own needs. Rebalancing for the sake of rebalancing will just add additional costs to your portfolio for little benefit.
 

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.... I just put my money where I think it will earn the highest return within my tolerance for risk. That changes over time. The need for re-balancing came to the media's attention when 'financial advisors' took over the role from stock brokers.
As usual leslie puts things well.

I also agree that if you are into re-balancing, do it when you have more $ to invest. Don't sell 'just' so you have money to buy in a re-balancing mode.
 

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Assuming you have a portfolio of no-fee mutual funds, and want to maintain a particular asset allocation, and aren't trying to market-time, the general opinion seems to be that once a year is sufficent. I might do it twice if I decide to make some other change in my portfolio makeup. Or if you are adding funds periodically do it then.
 

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I simply rebalance when adding new money to the portfolio. I have rebalanced the portfolio just once when stocks took a real beating and my bond allocation was about 7 or 8 percent more than target. Mostly though, I find rebalancing when adding new money more than sufficient.
 

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Discussion Starter #10
Rebalancing and RRSP contribution

It's interesting to see the number of people who rebalance by adding funds to the underweight asset. Does anybody use their RRSP contribution to do this rebalancing? If so, how will you be doing it this year (i.e what asset or ETF etc will get the extra funds)?
 

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Like many others who have already posted, I constantly rebalance as I put more money into my accounts. Then at least once per year I have a good look at my AA and see if any real issues have popped up and update it. For example, emerging market funds have really gone up and I was way over allocated so I sold some off and redeployed across a number of assets.
 

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Rebalancing is a simple safe way for the average investor to keep things in line. Myself I prefer to invest in what has the best potential regardless of whether or not I'm over or under weight the category, region, style, etc.
 
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