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  • Writer's pictureZach

My First Quarterly Rebalancing!

Updated: Feb 22, 2019

You've been investing for a bit, you have more money that you've saved to put into your account, and it's time to Rebalance! Now what? In this post I'll walk you through how I did my first rebalance and give a nice little table to show the numbers.

First, the table!

So I basically was already at my 80/20 Stock Bond Ratio and it was time to do my quarterly rebalancing, so I didn't have to change the percentage. Now, I have a couple Target Retirement Date funds, but I've decided to not include those, because they're already balanced automatically. This time around, I was only adding to my stock index funds, PRF and ARKW, and my main bond index, BND.

This is where it got a bit trickier than I thought it would be. I thought that since my allocation was pretty much where I wanted it, 81/19 instead of 80/20, (only 1 percent off!) that I could add an equal amount of money to each fund and keep it at the right percentage. Turns out that idea was way off, getting me to around a 75/25 split. So I had to go back to the drawing board.

Because my numbers didn't work out the first time, the ol' "trial and error" method of math class came in very handy! I tried a few numbers, realizing that I had to put in significantly more to the stock fund than the bond fund to keep roughly the same 80/20 allocation. In the end I figured out that I had to put $9500 into the stocks ($8000 for PRF and $1500 for ARKW) and $3436 into bonds in order to get the ratio I wanted.

All of that took me about 10 minutes of trying new numbers into my calculator. It wasn't hard, but it was harder than I thought it would be. I eventually found this rebalancing calculator from the amazing Millennial Revolution (after I was done, I remembered it existed, oops!), and I'll try using it next quarter to see if it saves me time.

After I knew how much to put into each fund, I looked up the stock price and divided that into the amount I was putting in to figure out how many shares to buy of each. Then I just put in the purchase order for each and I was done!

But, why would I do it now? Why not wait until April 23, the next time I was planning on checking my net worth? Dividends and the ex-dividend date. Basically, I want to be able to get the quarterly dividend that's coming up this month, but if I wait much longer, I'll miss it. You need your money in by a certain date to get the dividend, and that date is called an "ex-dividend date", and for my stock ones it's around March 18. Also, stocks are still a little off their high from the mini-correction a couple weeks ago, so I figured I'd buy a little lower than it may be later. That doesn't really matter much, in the long run, and probably some impatience played a part in my decision to do it now and not later. But I figure, it's not timing the market, it's time IN the market that counts, and earlier is better than later.

So far this year, I've put in around $18,000 into my investments. A lot of that is just finally getting my asset allocations in line with where they should be, but some is what I've saved. I certainly haven't saved $18,000 in the 2 months of 2018 (although that would be AWESOME). And I'm far ahead of my goal, which was to get $20,000 in my investments for the whole of 2018. I don't think my second quarter rebalancing around June 1 will have nearly as much to invest, but only time will tell.

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Disclaimer: The views expressed is provided as a general source of information only and should not be considered to be personal investment advice or solicitation to buy or sell securities. Investors considering any investment should consult with their investment advisor to ensure that it is suitable for the investor’s circumstances and risk tolerance before making any investment decisions. The information contained in this blog was obtained from sources believe to be reliable, however, we cannot represent that it is accurate or complete.

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