Rebalancing - to do or not to do?

Hello everyone. I am new to this investing lark and learning as I go along… has it been a bad week on on the Stock market this last week ? Anyway I trying to get my head around rebalancing as I have a few reds (I know it is early days and the time thing), but if you are in the red, should you just leave it and hopefully things will get better and go green, or do you adjust/rebalance the profolio, as the rebalancing/weighting is also a guessing game to get right. Any tips would be grateful. Thank you so much.

Rebalancing carries the costs of selling and buying ETFs to reset the risk, or investment, to the initial ratios.
It should be done as little as possible.
It is not about selling stock that has gone into the red, or diminished in value.
Last week was not a good week for me either. Crudely there are those who deal, that is buying and selling to beat the market and there are those who choose their ETFs based on performance and risk and who then step back. I am the latter. I have watched my investments go down in the past only to recover and do well.
Selling when stock has gone down is the worst time. It’s like selling deflated balloons to buy full ones. Balloons reflating will give better growth than ballons already inflated. Sorry, bad metaphor.

Thank you for replying. I am just trying and learning, some of my efts are vanguards and they were all down last week - but also trying to work out the best time to add funding to the account. Glad i dont work on the stockmarket it is up and down, so there is never a good time, I will just have faith and see or review it after a year or two as it is a long term thing - just don’t want to start badly then get worst. Thanks again.

Hi, the excellent Monevator blog has this to say… worth a read, methinks.

Thank you for that. I will have a read.

Agreed. It’s a good question. I played around with the rebalance function in my first month to get a sense of how it works. I’ll now manually adjust percentages more often than not and only rebalance if over a longer period, say approx. a year, my regions or holdings have got a bit skewed or a I make some fundamental changes to my portfolio as a whole. This is more cost-effective to my mind, but I’ll see in a year. As for the article, thank you, Monevator is super useful.

Glad I am not the only thinking this - you could get abit Ocd. Did not know about the change of percentages that would be better then the rebalancing. Still learning and finding things out. But it is still hard getting the percentages/weightings right and how many funds to have. It is a guessing game but maybe better to leave it and let it do the magic… you hope and review it yearly. 2024 is going to be a year of the General Election and the USA Election and everything else that is happening in the world, so the Stock market is going to be up and down and full of surprises.
Thank you everyone for reply.

Regarding selling a stock when it is down - I think of it this way: “do I want x% of my money to be in this fund” not “has it made a profit or loss since I bought it” as this helps falling prey to the sunk cost fallacy. Rebalancing is a way to maintain those selected percentages, so I do it after making any big percent changes.

The other thing to think of is Warren Buffet’s philosophy of buying when things are down, if you are sure they are going to go up, but who can be sure of anything in this game. Sometimes I get lucky, but more often than not I buy something for its long term prospects, and the first thing it does is immediately to go down. Most of them have come back up again; it is always a test of patience waiting for them to return to their long term trend again.

It depends on why you are rebalancing. If you are selling funds because they are not achieving expectations then get rid of them. Even at a small loss and put your money to work in something better. Or slicing off profits to put into other funds is another reason why I rebalance. But this will cost you with the spread charge. In all honesty, if you’re in a major index fund such as S&P 500, MSCI World or FTSE all world, then I would just leave it well alone unless you know what your doing… liquidity etc


Thank you everyone for replying and for your time and advice.

Just put it in the S&P 500 and do not check it every five minutes.

I was with HL before most of my money moved October 2021 and this is the current gains

I first moved after watching Investing Demystified - How to Invest if you can’t beat the markets It is really good

You would probably benefit from watch some videos by James Shack and Damien Talks Money

Thank you for replyling. I will watch the videos on youtube.

I am just catching up James Shack videos, watch his latest it really applies to you

Thank you

Less effort = better results.

A good tip to remember and to keep it simple.

After all it is small steps and time and of course the saying

Look after the pennies, and the pounds look after themselves

Has plenty of good beginner videos too.

Thank you for that. I will try and watch a few of them