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Just a quick question, where for some reason i'm having a tough time wrapping my head around it.

When rebalancing a portfolio, most people say to sell the units that are above your asset allocation and buy more of the difficient one to rebalance. Why not just add in more funds and purchase more of the defficient assets to rebalance? Is there an advantage or disadvantage?? or is there absolutely no difference?
 

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I think the difference is apparent: the former you need to sell once and buy once whereas for the latter you only need to buy once. The latter might not give you "perfect" allocation, but these things aren't intended to be perfect, close enough is good enough.
 

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If you're adding more funds anyway it only makes sense to add to the deficient assets to rebalance as you go. This is what I do

I can imagine that won't always work as the numbers get bigger
 

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Just a quick question, where for some reason i'm having a tough time wrapping my head around it.

When rebalancing a portfolio, most people say to sell the units that are above your asset allocation and buy more of the difficient one to rebalance. Why not just add in more funds and purchase more of the defficient assets to rebalance? Is there an advantage or disadvantage?? or is there absolutely no difference?
Reblancing usually implies using the current capital.
 

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I want to keep my trading cost low, so I only rebalance once a year. My savings rate is comparatively big compare to my portfolio size, so it works out that I never have to sell. This may change as my portfolio gets much bigger.
 

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I want to keep my trading cost low, so I only rebalance once a year. My savings rate is comparatively big compare to my portfolio size, so it works out that I never have to sell. This may change as my portfolio gets much bigger.
You might want to consider buying an index fund.
 

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@alphatrader: I'm already using index funds. (XSB, XIC, VTI, VEA, VWO, etc) Do you mean a "balanced fund" ? I can't find one with low enough fee that fits my asset allocation. I want my portfolio to have < 0.25% MER.
 

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@alphatrader: I'm already using index funds. (XSB, XIC, VTI, VEA, VWO, etc) Do you mean a "balanced fund" ? I can't find one with low enough fee that fits my asset allocation. I want my portfolio to have < 0.25% MER.
Dont we all want MER<%0.25. :)

You can create your own "balanced fund". %60 XIU + %40 PCD.UN (if you feel lucky on those converts) ;) I dont

PS you wont get %0.25

cheers,
 
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