CapitalTime

Articles on investing and capital management, with a quantitative focus.

Annual Rebalancing

2024-12-19

I like to rebalance my portfolio once a year. When I updated my asset allocation in the middle of the year, the weights of some assets had already moved closer to their new target levels.

In the last couple of days, I made some additional trades to complete this transition to my new asset allocation.

The market moved sharply on December 18, just after I completed my rebalancing, and my portfolio fell -1.34%. If I had not rebalanced, the move would have been -1.29%.

It’s reassuring to see that these numbers are very similar, and rebalancing had a negligible impact. In any case, annual rebalancing is codified in my plan, and I think it’s always important to “stick with the plan”.

According to this paper, Vanguard also seems to like the annual rebalancing strategy.

— Jem Berkes