Rebalancing The ETF Monkey Vanguard Core Portfolio

In connection with the philosophy explained in this article, I executed a series of rebalancing transactions in The ETF Monkey Vanguard Core Portfolio as of pricing available at approximately 9:30 a.m. Pacific Time on February 11, 2016.

The Rebalancing Transactions

Here is a graphic of the Excel worksheet I used to analyze the rationale for rebalancing, calculate and track the necessary transactions, as well as display the "before and after" status of the portfolio. Please note that you can click on the picture to see an enlarged view.

Rebalancing The ETF Monkey Vanguard Core Portfolio - Before and After

As can be seen in the "Before Rebalancing" section, due to the extremely sharp decline in both domestic and foreign stocks during this first part of 2016, the weightings of these asset classes had fallen significantly below our targets; almost 2% in the case of foreign stocks. At the same time, bonds were 1.3% above their target weight, and we also had $580.31 of cash from dividends received that could be put to use.

In the "Rebalancing Transaction" section, I decided on the scope of the rebalancing transaction I wished to execute and the transactions needed to do so. You will note that, as is my practice with this portfolio, to make this as "real world" as possible I reflected the $7.95 commission incurred on each trade, as a Fidelity client.

Finally, the "After Rebalancing Section" displays the portfolio after all transactions were completed. Since the collective transactions consumed $519.90 of cash, we are left with a cash balance of $60.41 in the portfolio.

Here is a screen shot of the revised portfolio in Google Finance. Note that it varies by just a few dollars from the Excel "after" picture because a few minutes had elapsed by the time I did the work and captured the screen shot. If you look at the "overall return" column, you will find that this picture is useful for documenting just how severe the decline in both domestic and foreign stocks has been since the portfolio was initially "purchased" on June 30, 2015.

The Portfolio in Google Finance - Post Rebalancing

Summary and Observations

This was a fairly aggressive rebalancing transaction. When completed, it actually left the portfolio a little overweight in U.S. stocks and underweight in bonds. Precisely because of the severe decline in both U.S. and foreign stocks, I made the decision to get just a little aggressive and overweight them slightly.

What I would like you to note about this is that, while I never go "all or nothing" into or out of a given asset class, I may engage in what I would call a gentle effort at market timing by temporarily playing with the weights to what, in my view, is a reasonable degree. Please bear in mind that, since I am incurring commissions on each transaction, I want to keep the number of transactions to a minimum. Therefore, I have to think seriously about making each transaction count.

I hope you have found this article both interesting and helpful. I hope to report on the performance of the portfolio at the end of Q1, and it will be interesting to gauge the validity and effectiveness of these transactions at that time. In the meantime, I wish you . . .

Happy investing!


-----------
Disclosure: I am not a registered investment advisor or broker/dealer. Readers are cautioned that the material contained herein should be used solely for informational purposes, and are encouraged to consult with their financial and/or tax advisor respecting the applicability of this information to their personal circumstances. Investing involves risk, including the loss of principal. Readers are solely responsible for their own investment decisions.