Understanding Rebalancing

šŸ„§ Pies & AutoInvest
1

Hi

A question about rebalancingā€¦

One of my pies is suggesting i rebalanceā€¦

image
image286Ɨ582 46.2 KB

I noticed that it was wanting to sell 6 companies at Ā£1 each and buy just one company at Ā£1.08ā€¦ which to me is a loss?

T212 has said:

image
image217Ɨ108 14.6 KB

which does suggest to me by rebalancing i lose Ā£5.92 - which just doesnā€™t seem right to me!

Soā€¦ do i lose Ā£5.92 from rebalancing or have i misunderstood something.

If i am losing Ā£5.92 on just one rebalancing then it seems likely all my profits will be wiped out when rebalancing.

Thanks!

2

Are you sure itā€™s not a minimum sale value because the rebalance is so small, the difference would then remain in cash?

1 Like
3

It seems like that pie has about 15 stocks and about 15-20 GBP total value, is that right?

Doing a manual rebalance on such a pie when thereā€™s 1 GBP min. order value does not make much sense.

As Dougal1984 mentioned, you will end up with the excess money from the sold shares sitting in the cash pile. You will not lose it.

I would rather ā€œrebalanceā€ the pie by investing a bit more funds into it and use the self-balancing distribution to achieve (or at least get closer to) the target % allocation.

4

Hi.
Unfortunately, I have absolutely no idea what this is.

As per image, the 212 advisor has said ā€œ7 USD worth of shares will be soldā€¦ā€ā€¦

So i was seeking views of the accuracy of that response.

5

Why not just rebalance when you put more in? When you buy stocks in a pie, the minimum pie investment if you have 100 stocks and one stock requires a minimum investment of Ā£1 is Ā£100.

The same you could argue in reverse, to best rebalance a pie with no new funds for a new holding added, is you need to sell the minimum lot size and purchase the new stock.

1 Like
6

Thanks Dougal - I will do that, rebalance when i put more in.

1 Like
7

Ideally you want to rebalance your portfolio as little as possible. That way you avoid market fees and bid/ask spread and any other fees like FX charges.

1 Like
8

Thanks again - appreciated.