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132

So, you have a portfolio of around 50k, and you're wondering whether you should change it. The question I always ask myself in this kind of situation is: If someone gave you 50k today, how would you invest it? If the answer is "I would put 46% into this one stock, and the remaining 54% into others" then there is your answer. If you would buy a different ...


13

Before you buy a stock (or anything else to be honest) you should have an entry and an exit criteria set. These criteria should be based on a calculated metric rather than a fixed number or a subjective or emotive reason. The metric may be related to an ethical measure such as level of commitment to reducing plastic waste but should be consistently ...


12

With regard to commodity futures, a paper released in January 2010 by Aulerich, Irwin, and Garcia, concluded that index funds have essentially no impact on commodity futures. Looking at stocks, a stock that gets included in a major index does increase in price. It increases its turnover by 27% and increases its price by between 2.7% and 5.5%, according to ...


12

In addition to the other helpful answers here, I think a practical consideration/caution is in order. Rebalancing is a good idea in general, but it does have costs. Every time you make a transaction with a stock or fund, you incur costs - whether in the transaction itself (commission) or in taxes/etc. That's not to say you shouldn't do it - having one ...


11

Generally speaking, when rebalancing portfolios, what should be done here? Should I sell off the 1080 USD as profit, to take my speculative investment back to 10% of my current portfolio value? Just selling 1080 is not "rebalancing". Rebalancing is an operation that involves the whole portfolio, not any single investment. Let's do the math: 10% of the ...


10

A strategy of rebalancing assumes that the business cycle will continue, that all bull and bear markets end eventually. Imagine that you maintained a 50% split between a US Treasury bond mutual fund (VUSTX) and an S&P 500 stock mutual fund (VFINX) beginning with a $10,000 investment in each on January 1, 2008, then on the first of each year you ...


9

Technical Analysis in general is something to be cognizant of, I don't use a majority of studies and consider them a waste of time. I also use quantitative analysis more so than technical analysis, and prefer the insight it gives into the market. The markets are more about predicting other people's behavior, psychology. So if you are trading an equity ...


9

There's nothing to rebalance, the index fund rebalances itself to continue matching the index. However, you need to understand that such an investment is not diversified and you only invest in a very specific market, and very specific stocks on that market. S&P 500 is large (500 different companies, most of the time), but still not as broadly ...


8

Now, if I'm not mistaken, tracking a value-weighted index is extremely easy - just buy the shares in the exact amount they are in the index and wait. Yes in theory. In practise this is difficult. Most funds that track S&P do it on sample basis. This is to maintain the fund size. Although I don't have / know the exact number ... if one wants to replicate ...


8

I don't need funds at this time. Then there's nothing to do. If the strategy is "buy and hold" then you keep holding. When you need capital you assess your allocations and potentially sell some of this position. If you think you have allocation issues now, then the decision to reallocate anything would have to include an assessment of all your assets (...


7

A 401(k) is tax-deferred. Rebalancing assets in a 401(k) is not a taxable event. In a taxable non-retirement account, you would figure out what investments have the best return after taxes. In a tax-advantaged account (like a 401(k), Roth 401(k), IRA, or Roth IRA) you simply figure out what investments have the best return. This is why some people advise ...


7

You're completely missing the most important thing you can do: minimize fees. There is no reason whatsoever to pay a yearly account fee. Take your business to a broker that does not take such fees. Some of those funds have ridiculously high expense ratios. Sell them and buy an ETF with a TER of less than 0.5% - and don't pay an Ausgabeaufschlag.


6

The study of technical analysis is generally used (sometimes successfully) to time the markets. There are many aspects to technical analysis, but the simplest form is to look for uptrends and downtrends in the charts. Generally higher highs and higher lows is considered an uptrend. And lower lows and lower highs is considered a downtrend. A trend ...


6

Conventional wisdom is that one should rebalance one's portfolio in order to balance risk and reward, adhering to the goals of a portfolio. It's the most important decision that you can make after determining what assets you will hold. So now you're caught between two conflicting realities - you think that it may have additional upside potential since ...


5

If you are paying any percentage fees for buying a fund, the constant churn inherent in your strategy would be really bad. If the trading fees are low, it's OK. But the real question is whether your focus on Morningstar ratings is useful. They indicate nothing more than relative past performance. I guess it comes down to whether you believe that active ...


5

Here's an easy test... Look at the investments in your portfolio and ask yourself whether if you had the cash value, would you buy those same investments today, because effectively that is what you are doing when you continue to hold. If the answer is no, sell and pick something else. Above all else, don't react to market swings, in most cases you are ...


5

"Buy and hold" doesn't have an exact definition, as far as I know. In my opinion, it's offered as a contrast to those who trade too frequently, or panic every time the market drops 2%. For the general market, e.g. your S&P index holdings. You sell to rebalance to your desired asset allocation. As a personal example, at 50, I was full up invested, 95%+ ...


5

At a risk of stating the obvious: a passive portfolio doesn't try to speculate on such matters.


5

As mentioned by others, dollar cost averaging is just a fancy term for how many shares your individual purchases get when you are initially adding money to your investment accounts. Once the money is invested, annual or quarterly rebalancing serves the purpose of taking advantage of higher rates of growth in particular market sectors. You define the asset ...


5

If you are making regular periodic investments (e.g. each pay period into a 401(k) plan) or via automatic investment scheme in a non-tax-deferred portfolio (e.g. every month, $200 goes automatically from your checking account to your broker or mutual fund house), then one way of rebalancing (over a period of time) is to direct your investment differently ...


5

The harvested losses are capital losses. See this IRS page: Generally, realized capital losses are first offset against realized capital gains. Any excess losses can be deducted against ordinary income up to $3,000 ($1,500 if married filing separately) on line 13 of Form 1040. Losses in excess of this limit can be carried forward to later years to ...


5

Vanguard said about it from Best practices for portfolio rebalancing(Link): The primary goal of a rebalancing strategy is to minimize risk relative to a target asset allocation, rather than to maximize returns. Over time, asset classes produce different returns that can change the portfolio’s asset allocation. To recapture the portfolio’s ...


5

Bonds help diversify an equity portfolio, which reduces risk (the amount of swing up or down that you can expect from a portfolio). Yes, historically equities have a higher average return than bonds, but over short periods of time they can also have much higher losses than bonds. So if you have a relatively short investment horizon (less than 5 years) and ...


4

Most advisors will be an advocate for "rebalancing." This advocacy is generally based on modern portfolio theory (same theory responsible for "the 4% rule"). The theory's idea is that rebalancing readjusts the return/risk profile of the "investment" to its original risk/return profile. The fear is, if one holding of the portfolio outperforms the rest and ...


4

The expense ratio is 0.17% so doesnt that mean that for every 10K I keep in the money market fund I lose $17/year? Not really. The expense ratio is taken before distributions are paid which applies to all mutual funds. Should I care about this? In this case not really. If it was a taxable account, then other options may be more tax-efficient that is ...


4

There are ways to mitigate, but since you're not protected by a tax-deferred/advantaged account, the realized income will be taxed. But you can do any of the followings to reduce the burden: Prefer selling either short positions that are at loss or long positions that are at gain. Do not invest in stocks, but rather in index funds that do the rebalancing ...


4

My answer is Microsoft Excel. Google "VBA for dummies" (seriously) and find out if your brokerage offers an 'API'. With a brief understanding of coding you can get a spreadsheet that is live connected to your brokers data stream. Say you have a spreadsheet with the 1990 value of each in the first two columns (cells a1 and b1). Maybe this formula could ...


4

Rebalancing has been studied empirically quite a bit, but not particularly carefully and actually turns out to be very hard to study well. The main problem is that you don't know until afterward if your target weights were optimal so a bad rebalancing program might give better performance if it strayed closer to optimal weights even if it didn't do an ...


4

There will quickly come a time when buying to rebalance is impractical. Consider, you save 10%, and at some point, you have 5x your income saved. (you earn $50K and have accumulated $250K). A simple allocation, 50/50, so $125K stock, $125K bonds. Now, in a year the market is up much over 4%, your $5K deposit will not be enough to balance. Earlier on, the ...


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