Does anyone have a "formal" method for doing a quarterly rebalance of a Stock Rank based portfolio? My basic plan has been to topslice anything that has gained more the 10% and unload anything which has had a Stock Rank downgrade. Proceeds to be used to buy the top ranked share at the time - always trying to take diversification into account.
Any other ideas out there as to timing (Quarterly, half yearly, annually) and at what level of profit or loss on individual shares to trigger sales etc.
Quarterly rebalancing is a very aggressive rebalancing timescale for most portfolios, unless:
- it's a tax efficient account.
- there's enough capital so that transaction costs / commissions are relatively smaller.
- stocks chosen have tight enough spreads & liquidity to ensure not too much slippage.
We've written some blogs on the subject:
Greenblatt would say that annual rebalancing is about right for most investors but it's all so sensitive to one's own personal situation. If you trade big caps, with tight spreads, in a tax efficient ISA account which is sizeable, plus with a low cost execution only broker, then even a monthly rebalanced strategy could work.
I promise we'll add a simulator to the site in due course so that an estimate of costs for any rebalancing strategy can be accurately assessed. But that's 12 months away I guess.
