After Canadian equities fell a lot on Monday (followed by some big losses the week before) I was curious to see how far out of balance my portfolio was. So I plugged my portfolio’s numbers into a spreadsheet I use to balance my portfolio (I would share that spreadsheet but it’s a bit hard to use). It turned out that Canadian equities were the furthest out of whack in percentage terms. The portion of Canadian equities in my portfolio was 20% less than what it started out as (and what I intend it to always be at). I checked out how much cash I had in my RRSP and it was about $1,700. I normally wait until I have $2,000 and just buy something as soon as I notice that my cash balance has exceeded that target. Anyways, I bought $1,700 worth of XIC when the TSX was down about 600 points and got lucky because the next day it was up again and now it’s up over 2.5%. It’s hard to say if this is market timing or not (when I was going to buy some XIC anyways as soon as I had over $2,000 in cash, which would be by February 1, 2008). The one thing I am disappointed about is the fact that I bought and ETF with less than $1,700 and paid a $19.99 commission. I had set a threshold for myself of $2,000 to help minimize transaction costs. In hindsight one could argue that the gains I made offset those costs, however, hindsight is 20/20, and on Monday no on could have predicted what was going to happen on Tuesday. How do I know this? Well everyone would be buying on Monday but they weren’t.
4 thoughts on “Increased My XIC Position”
Hi – Very interesting. As with many others, rebalancing is a very necessary task. I have heard, however, of some recent studies that indicate regular/frequent rebalancing does not necessarily produce better results. I would be very interested in seeing your spreadsheet – I’m always looking for a better way. As far as being hard to use, I have been using Excel for over 20 years (I was an original beta tester) so I’d give it a shot.
Thanks for the article
Al, I’ve sent you my spreadsheet. If anyone else wants it, post here with your email address (only I will see it) or contact me via my contact form.
Al, I should note that my portfolio is never really rebalanced in the traditional sense of the word because I am never selling, only buying. It wouldn’t surprise me if rebalancing (selling some things and buying others) would not produce better results simply because of transaction costs.
But are those studies saying that if we completely ignore transaction costs rebalancing still gives no benefit? I find that a bit hard to believe, but I have an open mind. Please provide some links to some studies for us all to share!
Hi – One reference on rebalancing frequency is this one
From the FPA Journal.