# annual rebalancing - when?



## jimmm (Jan 2, 2019)

I'm a couple of years from retirement and thinking through the process of annual portfolio rebalancing. One basic question - What time of year is best to do this, and why? I'm sure there is no clear cut answer, but I'm interested to hear the opinions of the folks here.


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## Topo (Aug 31, 2019)

If I were to rebalance annually, I would prefer early January for two reasons: 1. Any taxes on any capital gains generated could be deferred until April of the next year (assuming you do not pay installations). #2. It is not uncommon for the market to rally at year end. It may pay to stay invested in equities until after December. Of course the reverse would apply to rebalancing from bonds to stocks, but most years stocks beat bonds.


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## james4beach (Nov 15, 2012)

My approach is to rebalance each year in December or January. I attempt in mid to late December, and if I encounter a capital gain that I want to delay, then I just wait until after January 1.


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## cainvest (May 1, 2013)

Normally rebalance in Jan/Feb when I'm adding new money into my TFSA/RRSP.


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## ian (Jun 18, 2016)

We do a review in November for tax planning purposes. We would typically do any changes after that-either before the year end or after depending on the tax consequences and the marketplace.


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## P_I (Dec 2, 2011)

Two part answer. Since we are still in accumulation mode, we re-balance regularly as new cash or investment income (dividends, interest payments) is added into the portfolio, the new cash is generally deployed into the asset class furthest from our target asset allocation. The second part is our annual review which occurs mid-year where re-balancing theoretically occurs. Since our re-balancing bands are +/- 5%, we don't trigger an annual re-balance very often. In fact I don't recall when we last took this step.


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## like_to_retire (Oct 9, 2016)

P_I said:


> Since we are still in accumulation mode, we re-balance regularly as new cash or investment income (dividends, interest payments) is added into the portfolio, the new cash is generally deployed into the asset class furthest from our target asset allocation.



I think this is a perfect answer for someone in accumulation mode, and would likely be an unusable answer for someone who was retired and exclusively needed their portfolio for income.

The OP says they are not yet retired, but it seems they are looking for advice on how to rebalance when retirement occurs. We have no idea about their pensions or what portion of their portfolio they need to generate their income.

There's a big difference between the usual case of someone who is accumulating and someone who is retired and needs an income generated from their portfolio. There's also the consideration that someone may not need much income from their portfolio because they have sufficient pensions to cover some or all of their needs.

That said, you can see that it's useless to try and come up with a general rebalancing rule because each case is so unique and different.

P_I's answer is perfect for his situation, but when I look at my own situation, I do exactly what he does, except I've been retired for 13 years. Fortunately for me, my pensions more than cover my expenses, and I never have to touch my portfolio. This allows the cash thrown off to be directed (as P_I indicates in his post) to be deployed into the asset class furthest from our target asset allocation. This results in a continuous year round re-balancing by throwing available cash at whatever allocation is low at the time - basically a near perfect situation. See how different that is from someone that requires all that cash for their income? Those individuals have to pick a time to sell and then buy to satisfy their desired allocations.

There are so many situations. Those that use their portfolio to generate all their income compared to those that don't use any of it for income, and all the variation in between. Each will generate a different rebalancing situation.

ltr


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## jimmm (Jan 2, 2019)

Thanks everyone for input! This gives me lots more to think about, and gives me some good insights into what others have already figured out.
I'm sure I will have lots more questions in the next few years, and hopefully I can eventually "return the favour" and provide some helpful advice/opinions to others.


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## canew90 (Jul 13, 2016)

78 and I never re-balance. Have held the same stocks for many years and the only time I made a change was when I sold a few years back, only to add the money to the others I owned. My belief is that if the companies I own keep paying and growing my income, why would I wish to make a change.


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## Rising Tide (Jun 5, 2019)

I am accumulating so I rebalance as I add money to the portfolio, maybe 4 times per year, however I prefer to coordinate the majority of the balancing to January.

However, if you're not adding money or if you're doing lump sums, I think rebalancing once a year is fine.


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## lonewolf :) (Sep 13, 2016)

I would use the decennial pattern to rebalance. Cant remember exact statistics it was something like over the last 100 years using the pattern beat the buy in hold by over 44 fold. google miller decennial pattern & you will probably find the stats.


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