I've developed a code to optimize the new money coming into my etoro portfolio. However, I do not reallocate the funds that are already there. Should I?

Context: I'm young and starting to earn a living. I read "The Intelligent Investor" and I learned about value investing but I'm questioning myself since this article from the Financial Times.

My goal: is to have enough money in 4 years time to allow me to try to live of my passion: telling stories

  • Your link is a $ubscription page. Where's the beef??? Umm link to article? – Bob Baerker May 20 '20 at 23:06
  • @BobBaerker Updated, happy reading ;) – Revolucion for Monica May 20 '20 at 23:42

You just need to “rebalance” to the extent that your allocations drift from your target, e.g., 90% equities / 10% fixed income drifting to 91 / 9. It’s unlikely that you’ll need to completely reallocate.


The point of rebalancing is to decrease the allocation to securities that have performed well (sell high) and increase those that have not performed as well "buy low". If you add funds to the account often, you might be able to maintain your target allocation just by choosing the percentage of each that you buy with the new funds - but if you are significantly out-of-balance and you can't cover it with just new funds, then you'll need to reallocate some of your existing investments to maintain a balance.

Rebalancing existing investments is a tradeoff between keeping a precise allocation and reducing transaction costs. You may only want to rebalance when one category gets, say, 10% out of balance.

My goal: is to have enough money in 4 years time to allow me to try to live of my passion

That's great! most people don't have specific goals in mind - they just want to make as much money as possible. That often leads to too much risk which is detrimental in downturn.

You may not be there yet, but at some point in the next few years I would recommend that you start looking more at the risk of your portfolio. How much do you need to reach your goal? Will your current return get you there? Do you have some room to reduce your return in order to reduce risk? Are you OK with extra return if it means that you might "retire" in 6 years instead of 4? These are some questions to consider when determine the proper balance of investments.

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