Posted by Tim Stobbs on January 8, 2007
The good news out of this for any index investor is if you timed your rebalancing over the holidays, you might have cut you losses. I managed to luck out and cash out 10% of my TSX holdings prior to last week and move it to another fund. So I manged to cushion my personal lost to a mere 0.4% of my RRSP’s total value. If you weren’t so lucky it might be a good time to use any extra cash in your account to buy in, since these sell off’s tend to be a bit of an over kill (Does any remember the panic at the beginning of Nov 2006?).
There has been some debate lately on how to time your rebalancing. There is evidence to suggest that you should wait until a given class of assest is out by 5% or more rather than just doing it once a year. I personally can’t be bothered. I like my index investing because I can literally do it in my sleep. I only do one complete rebalance at the start of the year and otherwise just use my monthly cash installments to top any fund that is lower than the rest.
So that’s my method of rebalancing. If you have a great easy way to handle it better, I would love to hear about it, so please leave a comment.