Portfolio Rebalancing
When you have your asset portfolio in your brokerage depot, you would probably want to rebalance your portfolio once in a while. The motivation behind that is to uphold your risk distribution in your portfolio and follow anti-cyclical investment decisions.
The rationale is that growth equals out over long terms.
As a good general overview on Portfolio Rebalancing on justetf.com.
Many brokers do offer portfolio rebalancing, however that usually comes at a price. Couldn’t be so hard, i thought myself and created a Google Spreadsheet…
Rebalancing Approaches
There are 2 well known approaches to portfolio rebalancing:
- Classic Rebalancing
- Cash Flow Rebalancing
The main difference is, that you only buy and not sell any assets in the cash flow approach. The classic rebalancing approach works with selling/buying at the same time to reach the target distribution. Check out the following picture for explanation:
Preparation
The first thing we need is a kind of export of your portfolio with all the necessary data to make the calculation. We need the assets, current price, amount, savings rate, item distribution etc…
Use the following spreadsheet as a template: https://docs.google.com/spreadsheets/d/1Lc1U3VXlsYPMxnCoAKxJSRJ92Z6olWBUA3U1ve67kxA/edit?usp=sharing
The usage is pretty simple:
- Import your portfolio balance as a CSV and import it into the “import” sheet:
- Set the savings rate in the first sheet
- Distribute savings rate among the assets you want
- Finished!
Calculation
Now that we have imported the portfolio and pre-configured our desired distribution, we can go to the rebalancing sheet.
There you will then see, in a cash flow rebalancing, how much from what asset you would need to buy in order to achieve your target distribution:
The sheet can also easily be adapted to calculate the classic rebalancing, which includes also selling assets.
Hope that was helpful. Feedback welcome.
