No. of Recommendations: 2
I have read a number of papers on rebalancing, including studies on the "best" rebalance period.
Which study claimed that the optimal time between rebalances is somewhere between 7 years and never.
Did a quick check using GTR1 for SP500 constituents.
The assumption is that when new stocks are added and old are removed, the funds from sales are equally distributed among new stocks, not all stocks. Then rebalancing takes place at some future date depending on the re-balance schedule.
No friction in calculation. From 1957 using sp500.a=1 in GTR1
10d - 12,5% CAGR
20d - 12.3%
63d - 12.2%
126d - 12.2%
253d - 12.2%
2yr - 12.1%
3yr -12.4%
7yr 12.2%
Looks to me, don't sweat the details. Do yearly for long term capital gains or if in a tax protected account do yearly and take out RMD. I think I would even wait for a year to add and remove stocks. No rush to add the new stocks as they have run up in price before the announcement.
Aussi
