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Currently, I have about $330k invested in ETFs. When I started investing I knew about lazy portfolios constructed using total market index funds like 3 fund or 4 fund portfolios. For whatever reason, I decided to construct my portfolio in a slice-and-dice manner. This is my portfolio:

  1. Large cap growth, QQQ, 43%
  2. Large cap blend, VOO, 32%
  3. Small cap, VTWO, 10%
  4. International, VEU, 5%
  5. Bonds, 8%
  6. REIT, 2%

The two problems I see with the slice and dice approach is:

  1. I have to keep following the news understand which market sectors are doing the best and tilt my portfolio in that direction. Lots of work is needed to maintain the portfolio which makes this seem less like passive investing and more like active investing.
  2. Rebalancing this portfolio is a pain because there are too many ETFs. One or the other components is constantly drifting out of its target allocation range and taking up too much space. QQQ was supposed to be 25% in my portifolio, but it's now close to 45% in my portfolio now.

I am currently around $100k in profits. If I wanted to start from scratch, I would have to stop investing for a year and pay $15k in capital gains when I sell everything.

Not sure if it is recommended to continue down this lane. But if you recommend that I continue my slice and dice approach, how should I pick the correct allocation among my various assets. Also, should I keep the current set of ETFs or should I sell anything?

My other option is to use future monies to build a 4 fund portfolio and keep my existing portfolio intact without selling anything.

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    How often do you rebalance? What other work is needed besides in re-balancing?
    – RonJohn
    Commented Aug 14, 2021 at 5:38
  • I don't know how often I need to rebalance, I have to constantly follow stock market news to know when to rebalance.
    – Aditya
    Commented Aug 14, 2021 at 20:44
  • With a total market index fund like VTI, they just rebalance when the underlying index refunds. And the people who manage the underlying index have an army of economists to study the market to determine the relative allocations in the index. This is something that is painful for me to do on my own.
    – Aditya
    Commented Aug 14, 2021 at 20:47
  • Suppose I feel small caps are doing better than large caps. Then (1) I need to spend some time figuring out if this is a short-term trend or a long-term trend and if it is worth rebalancing. (2) I need to liquidate some of my large-cap holdings and move that money into small caps, doing which requires me to pay capital gains taxes, but for vanguard, they have swaps and other sophisticated trading tools which I don't have access to, for doing the rebalancing. So they can do the rebalancing without incurring any taxes.
    – Aditya
    Commented Aug 14, 2021 at 20:49
  • "Suppose I feel small caps are doing better than large caps"... are you a trader or an investor?
    – RonJohn
    Commented Aug 14, 2021 at 20:52

1 Answer 1

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If the reason that you had for choosing the asset allocation that you chose still appears to be valid, you should stick with it. A rebalancing every year or even once per quarter shouldn’t be cumbersome especially in this day and age of zero commissions. Not exactly sure what your question is here.

You actually seem to have a very logical straightforward approach that you just need to stick with.

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    Agree wholeheartedly. One note, though: if this is a taxable account, then OP should wait a year, so as not to generate short-term CG.
    – RonJohn
    Commented Aug 14, 2021 at 20:51
  • @RonJohn - excellent point. If the rebalance caused net short term gains. It can go either way, depending on the year. Commented Aug 14, 2021 at 21:03

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