How to Lower Your Rebalancing Costs

Last week I looked at why you should rebalance your portfolio, and considered the question of how often to do it. The frequency with which you rebalance often comes down to cost. If you’re using index mutual funds in a registered account, the cost may be zero. But if you’re paying ETF trading commissions or […]



Online only.


Last week I looked at why you should rebalance your portfolio, and considered the question of how often to do it. The frequency with which you rebalance often comes down to cost. If you’re using index mutual funds in a registered account, the cost may be zero. But if you’re paying ETF trading commissions or incurring capital gains taxes when you rebalance, then you should consider strategies to keep your costs as low as possible.

Here are three ideas for lowering your rebalancing costs. And at the bottom of this post, I’ve also included a rebalancing spreadsheet that you can download and adapt for your own portfolio.

Do it less often

I recently heard from an investor who put $10,000 in the Global Couch Potato four years ago, using iShares ETFs. He said he religiously rebalanced the portfolio once a year—at $29 per trade. That means trading commissions eroded about 1% of his portfolio’s value annually. Any advantage that rebalancing might have given this investor would likely have been wiped out by that excessive cost.

If you have a small ETF portfolio, keep rebalancing to a minimum, especially if you are paying high brokerage commissions. Unless your portfolio is way out of whack, there is no pressing need to rebalance annually—every second year is fine.

Focus on the broad stock-bond mix

Your overall blend of fixed income and equities has the greatest influence on your portfolio’s volatility. The rest is just details, so don’t obsess over them. For example, let’s say your target is 30% bonds and 70% stocks, divided as follows: 20% Canadian, 20% US, 20% international and 10% emerging markets. A year later, you find yourself with 24% Canadian, 19% US, 18% international and 11% emerging markets, for a total of 72% equities.

You probably don’t even need to rebalance this portfolio at all, because your overall stock-bond mix has barely changed. If you feel you must, you can simply trim 2% from the Canadian equity fund and putting it into bonds. Making any additional trades would just be a waste of money.

Mix mutual funds and ETFs

While index mutual funds generally have higher annual fees than ETFs, they do have one big advantage: you can add or withdraw small amounts of money without cost. Even if you’re primarily an ETF investor, consider keeping one or more of your holdings in index funds to help lower rebalancing costs. If your broker is TD Waterhouse, for example, consider using e-Series funds for your core holdings and ETFs for emerging markets, REITs and other asset classes that those funds do not cover.

In my own RRSP, I actually use the PH&N Inflation-Linked Bond Fund rather than an ETF for my allocation to real return bonds. (Yes, it’s actively managed, but it costs 0.55% and its holdings are almost identical to the index ETFs.) As equities have outpaced bonds over the last two years, I have kept my allocation to fixed income in balance by adding new money to this fund, including the cash dividends paid out by my ETFs. This has allowed me to keep my overall stock-bond mix consistent without incurring any trading commissions.

A handy rebalancing spreadsheet

Confused by the math involved in rebalancing your portfolio? I’ve created a handy rebalancing spreadsheet, which you can download here. Here’s how to use it effectively:

  • In column A, enter the names of the index funds or ETFs in your portfolio. I’ve included room for multiple asset classes: you can add or delete rows as necessary.
  • In column B, enter the target allocation you’ve set for each of your asset classes.
  • In column C, enter the current value of each of your funds. The spreadsheet will calculate what percentage of your portfolio each fund represents and display this in column D.
  • When you’re ready to rebalance, enter the amount of new money you’re adding in cell B9. (If you plan to rebalance without adding any new money, enter $0.01.)
  • The spreadsheet will then calculate how much money you need to add or subtract from each fund in order to perfectly rebalance the portfolio. These values will appear in column E.

Hope you find the spreadsheet useful. Please let me know if you have any suggestions for improving it.


12 comments on “How to Lower Your Rebalancing Costs

  1. I love this this tool, very simple to use.
    Thank you


  2. Thank you for this submit. I really undoubtedly go along just what you are expression. I have been previously preaching about this approach matter a lot in recent times through dad therefore i hope that will make sure he can look at my own opinion. Arms crossed!.Good post.. I’m without a doubt you can get slideshow bunch but this particular one’s honestly wonderful. Looking ahead to the following!.After the smart understand I guess it’s time very enlightening. That i enjoy an individual spending some time to build this content with each other. One time i just as before find professionally wasting strategy to much time together checking and then placing comments. However no matter what, that it was even so worth the money!.A person chosen an outstanding subject in this article and you just had written relating to this good. I’ve come across added internet sites with just one subject matter however , # 1 did a more satisfactory job rather than your self on currently talking about them.Outstanding web page, although I would adore to find a lot more new media! ?§C Excellent submit regardless, Thank you!.My partner and i discover myself personally moving with regards to your world-wide-web web site an outstanding cope a lot of and extra in general with enough force simply where exactly my best outings really are virtually every single day nowadays!.Is that it so merely abandon some sort of one-way link to make sure you your internet site at here? Or even make sure you dismantle it! Thanks.It appears that you’ve inserted a great deal of endeavor inside this page and I need a ton more of these with all the world wide web now. I all the best gotten any defeat through your place. I don’t unquestionably include a great deal to suggest individuals . “, We basically want to statement to react awesome get the job done.Thank you very much in your extremely put is the keywords which preserves everyone on track through out our time. I have been seeking colse to make sure you with this website soon after being mentioned them with a friend and then was basically thrilled as i surely could uncover that following seeking out number of years. As a insisting tumblr,.Whoa i thought this was enlightening. Rarely run into websites as of late which are ??meaningful’. While which could conceivable pursue world wide web values constantly, i can unquestionably be sure to say thanks to you mcdougal associated with important blog post when i found. Preserve the great work.Appreciate your an unusually important content. T had been some sort of enjoyment scanning this document. fine web page.Simply followed onto inform you there are a new cooling fan! Perusing 1 posting with regards to your web-site bought us taken in easily. Genuinely, you could be fantastic!.The person lurking behind Madonna?south astounding body, Billy Manocchia, is actually revealing the particular exercise mysteries by means of absolutely everyone in unique handbook.I am just always doing a search online for articles and reviews that may reward all of us. Thanks a lot!.Fantastic piece of records that will you’ve attained on that website online article. Expectation I would get some really typically the thing all by yourself web site. I may are listed returning.I recommend how’s it going thinking?-and I have to acknowledge I’m really enslaved your posts!.We under no circumstances, at any time thought of We has to be informed about this approach thank goodness for the net, most suitable?.Great broad guidelines below.I’d like to suggest exploring plenty surrounding the understanding of chips. Manage?.i will be experiencing difficulity posting responses. Isn’t going to appear to employment choosing Firefox?-.everybody else having one of these situation?.Without doubt, actually enjoyed reading this post! Simplify some tips i didn’t have an understanding of. Many thanks.This is a good controlled by deal with. Normally to look at run into these types of the things i wish to document them concerning Digg. This post more than likely won’t be smart one of the keys audience. We are particular to send in diffrent while.Husband I want the review therefore am informational and i also feel definetly attending store it. Really easy to implement repeat the Indepth test you have done can be trully fantastic.Nobody runs which will one step further at present?.Just how I’m in search of, take care designed for putting up .It’s fairly attractive the fact that general audience mass media contains switched what talks about this kind of recently please do not you feel? Right now it seems that its described thoroughly and many more thoroughly. Complete while I’m trying to find a transform.Go out with Greetings, I had looked at most of your blog posts. This write-up might be exactly where Managed to get the best useful info with regard to a research. Nice one for post, it’s possible we can watch much more about this valuable. Find out about all other internet websites using this subject.Mankind Nice post that’s why am informational and that i in the morning will discover that. I’ve got to the Fantastic research this information has is normally significantly outstanding.Which will go who one step further lately?.Noticeably, this particular article is really the best using this remarkable issue. My partner and i harmonise with each of your final thoughts and tend to thirstily look ahead to ones own newly arriving enhancements. Indicating appreciate it will not just become enough.Doing a bit of shopping plus recognized your blog post would seem to be rather all of the all messed up into my K-meleon web browser. But yet happily scantily any individual applies the application like i used to however, you should research that.I want to thank you actually for your personal goals you get in some recoverable format this kind of content. I am hoping precisely the same best product from you finding out even later in life too. The reality is ones artistic publishing abilities own inspired me personally first my very own BlogEngine blog page currently.Everything that is usually about my thoughts might be cigs. We i’m ‘ don’t plan to create a lug if another person featured any tobacco right this minute, I’d personally will fall. My organization is in a very seriously sub standard developmental express as well as have already been having problems living asleep yet Actually, i know I need to grow to be solid.Your website is surely filled with extraordinary important information not to mention is definitely really fulfilling to enjoy a book with.I seemed to be thinking about, i am just aiming to create a blog page personally. I want to benefit from wp like your story. In which have done you will get ones layout? If you ever put up the way to go here excavation,i quickly will want over the following handful of day’s.Eventually an intelligent blogger-man?-I appreciate the simplest way you’re thinking?-and penning!.I’m which means successful to own detected this unique site . You will explained for me precisely what My spouse and i tried to perceive and more. Fabulous publishing a lot of thanks yet again for obtaining the Full absolutely free!.Exclusive webpage! I’ve bookmarked it all in addition to I’ll beback to learn to read additional down the road.Furthermore this is our first-time my spouse and i go here. I realized and so a number of interesting stuff inside your blog specially it is really debate. .Your site is undoubtedly teaching a lot more curiosity and even commitment. Appreciate it .Really! Thank you so much! I just continually wanted to produce regarding my web site something like that. Should i employ a portion from your place for you to great web log?.Thank you to get release very wonderful informations. Your internet is awesome, We are pleased from the highlights that you really possess during this web page. The application exhibits the simplest way very well you recognize it content.Kudos to you personally! That is a brilliant blog page there and i also really enjoy your look with posting. Ways have done the user gets so great from writing?.unique put up, just about coated the whole works personally though may with added far more subject at your web log essentially everyday and i also for example what’s happening utilizing this type of. A number of intresting articles or blog posts on the subject of loads of fascinating articles along with traits likewise, you could have abilities at making. I understand new stuff by making usage of this blog and then for we might thanks for your time along with my best spirit. Preserve this perform which usually you’re working on. Farewell.Is that it my personal web browser or perhaps the webpage, nevertheless I could basically witness fifty percent the actual put up. Precisely how should I re-establish it?.Appreciate it I had your main word wide web connection. Actually anybody available by simply possibility possess a support magnifying mirror web-site and also backlink to a further resource? Your weblink absolutely do not manage to be employed by all of us.I actually praise you’ll, I absolutely really like like you would cared for typically the sub?- you may may arrived at a site not to mention explain to some modifications. Thanks before.However russian can be my very own very first speech I seemed to be glad digesting this.Not long stated onto your blog and additionally plucked report to me personally with regards to different information. There should be a way to turn off which system? I’m receiving a great deal of e-mail addresses.Great tips, i think I’m about to need to bookmark the and are avalable time for doing it. Do you know of just about any reviews onto your last posting although?.Be grateful for the auspicious writeup. The software in fact would have been a fun bill that. Glance progressed that will much additional acceptable within you!.Just after analyze some of the blogposts with your website these days, i appreciate your way for blog. I just indicate doing it to be able to my top features website catalog and you will be reading returned very quickly. Could you go to our site additionally and also told me how you feel.Wonderful! It’s familiar understand my thoughts! You seem to are aware of plenty about this, like your story submitted the hem ebook to them or something. .I’ve got read a few a threads with your web page currently, i really love to your website with weblog.


  3. Nice commentary. last thirty days I uncovered this internet internet site and desired to permit you be conscious that i’ve been gratified, heading via your site’s posts. I should certainly be signing equally as much as the RSS feed and can wait around for another post. Cheers, Glen


  4. images are? illegal to copy with out permission if you dont have permission by the copyright holder, but thats why we have photo shop, manipulate the photo and claim it as your own


  5. I am finding couch potato investing becoming more complex with multiple accounts and given tax considerations. My wife and I have RSP accounts and TFSA accounts and a joint non-registered account. That adds up to at least 5 different accounts and some people may have more (for example, through an employee plan). Even with 5 accounts, it is very challenging to make monthly contributions, keep the correct asset allocation and rebalance among all the accounts. As our investments grow, we are starting to invest outside the RSP/TFSA for the first time and that means trying to shift the Canadian equity portion into the non-RSP account. With all this complexity, the couch potato is not looking so simple anymore. Your software looks good but it does not appear to work across multiple accounts and does not consider tax efficient investment. It would be great to have another spreadsheet that could accommodate more complex allocations. Alternatively, it would be helpful to know if there is any other software available (free or purchased) that you can recommend for this task.


  6. I cling on to listening in the direction of rumor speak about obtaining boundless internet dependent grant programs so i’ve been looking for near to for the best internet site to obtain one. Could you reveal to me please, especially where could i arrive around some?


  7. I really appreciate this post. I’ve been looking all over for this! Thank goodness I found it on Bing. You’ve made my day! Thx again


  8. I represented just seeking this original subject material awhile. Soon after all the time for example uninterrupted Googleing, finally I got it in your website. I inquire whats exactly the general shortage such as Google regimen the actual dont social status this phenomenal rather enlightening websites in tiptop of the tilt . Often the top sites are full including food waste .


  9. Good – I should definitely pronounce, impressed with your site. I had no trouble navigating through all tabs and related information ended up being truly simple to do to access. I recently found what I hoped for before you know it at all. Reasonably unusual. Is likely to appreciate it for those who add forums or anything, website theme . a tones way for your client to communicate. Nice task..


  10. One other issue is that if you are in a situation where you don’t have a cosigner then you may really want to try to wear out all of your money for college options. You will find many grants or loans and other scholarships or grants that will supply you with finances to aid with classes expenses. Thx for the post.


  11. Undeniably believe that which you stated. Your favorite reason seemed to be on the internet the simplest thing to be aware of. I say to you, I certainly get irked while people consider worries that they just do not know about. You managed to hit the nail upon the top as well as defined out the whole thing without having side-effects , people can take a signal. Will probably be back to get more. Thanks


Leave a comment

Your email address will not be published. Required fields are marked *