Hi.
Iām trying to organise my portfolio Pies and Main Stocks.
Question is When I rebalance any pie am I being charged every time. If so how can I avoid rebalancing charges.
Rebalancing sells your stocks that are over your desired percentage of the pie and buys more of the stocks that are under your desired percentage.
Those calculations and sales can be done manually but either way you will incur the cost of bid:offer spread and any FX charges. The FX charges are worse in an ISA because you cannot hold cash in foreign currencies; so all sales have to be converted to your primary currency and any purchases also have to be converted from your primary currency.
There is no way to avoid those charges. So you have to balance the ācostsā of sales and purchases against your desire to keep the pieās stock percentages close to the risks that you are prepared to tolerate.
In general IMHO rebalancing should be only done very occasionally and only after you have done your research. I never do automatic rebalancing: I adjust stock holdings manually, often involving exporting and importing stocks or transferring cash between other pies.
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It depends what your rebalancing.
If your trying to reduce exposure of something from say 30% to 20%, then yes you will need to sell/ rebalance.
If itās smaller than that, could you just wait and rebalance using your regular deposits?
This is why I try and have a buy and forget ETF strategy, to reduce my trading costs, although the ETFs themselves have rebalancing costs.
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Iāve been Chopping and changing my pies since 2020 without realising each change adds a charge. I dread to think what Iāve paid in charges. Maybe T212 should add monthly charges to the monthly reports showing Fx and Government etc charges. I now realise Pies are a stealth wealth eroded.
Iāve got a pie with only etfs in it. Which I may feed monthly going forward and extract their stock to sell from my main portfolio
Depends on how you use it I guess. I like to use Pies because of the free rebalancing. I set up the percentages I want for each ETF and AutoInvest will automatically rebalance for me.
Obviously only works as long as the monthly rate is still a significant amount relative to invested amount, and you do not constantly modify the pie. Even then you donāt have to click the āRebalanceā button, as long as you can live with the fact that your pie is out of balance and it may take a very long time for AutoInvest alone to bring your pie to the desired allocation.
You can view or download the FX and tax deductions in the history reports.
Hi
If I look at history it doesnāt show FX and tax deductions . My history transactions only show
Deposits and Deposit Fees, Withdrawals, Transfer, Result Adjustment, ADR Fee, Dividend Adjustment,
Am I correct in thinking if I had 10 stocks all at Ā£10 (Ā£100 invested in the Pie) and before rebalancing 8 stocks stayed the same value, and 1 went up 50% and 1 went down 50%. Then after I rebalanced the overall Pie value would still be Ā£100 as the stock which went up 50% would lose Ā£5 ( after rebalancing) of its value. This Ā£5 would go to increase the value of the stock which lost Ā£5.
Try orders not transactions.
Correct except that you will lose the bid:offer spread and, if applicable, any FX charges.
Yes as I thought. My initial Ā£100 just lost value due to rebalancing. A stealth tax/reduction on the value of the Pie.
So Pies can be costly over time if you rebalance regularly. Something to considerā¦.
Just to be clear, the bid:offer spread (and FX charges if applicable) apply to buying and selling all stocks and ETFs. It is not a direct result of using a pie but is something that all stockholders of stocks and ETFs should be aware of whether using pies or not.
Thatās not a problem with pies though. Iād call it an OCD tax. Whatās wrong if one stock makes up 15% instead of 10% and one stock 5% instead of 10%? Just let it breath.
Alternatively, you could just invest another Ā£50 into the pie an T212 will put Ā£10 into the stock that went down, nothing in the stock that went up and Ā£5 each into the 8 others. Now each of your stocks make up 10% again and you rebalanced for free. Sure, every transaction costs at least the spread, but thatās a cost you always have when investing anything. The rebalancing itself is free.