Rebalancing: What’s your trigger?

Posted by on September 11, 2009 @ 8:37 am in Investing

You probably know that Vanguard advocates periodic rebalancing as a way to manage risk in investment portfolios.

Our Investment Counseling & Research Group, overseen by my fellow blogger John Ameriks, has written a detailed white paper on rebalancing. John weighed in as part of a post discussing whether buy-and-hold investing is a dead idea. And we’ve written numerous other articles and blog posts on the topic of rebalancing.

Vanguard’s research suggests that it’s sensible for you to rebalance your portfolio to its target asset allocation annually, semiannually, or when the percentage allocated to a given asset class (cash, bonds, or stocks, for example) is more than 5 percentage points off your target.

I just finished a rebalancing exercise because I use my birthday in late August as a trigger for checking out the portfolio and doing any rejiggering made necessary by the market’s movements or by accumulated cash.

Anyway, this got me to wondering what triggers other investors to rebalance—assuming, of course, that you regularly do so.

Do you pick a particular date? Or do you use some other trigger?

Thoughts?

Note: All investing is subject to risks.

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