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charting retirement

It is commonly accepted that investors should rebalance their portfolios regularly. This means selling some funds and buying others in order to keep the overall asset mix unchanged. Without rebalancing, the asset mix will gradually drift away from its original target. A simple example will demonstrate how true that is.

My friend Valentino invested $1,000 on April 1, 2013, in each of four exchange-traded funds: a U.S. stock ETF, denominated in Canadian dollars (stock symbol XUS), a Canadian stock ETF (XIC), an international stock ETF (XEF) and a Canadian bond ETF (XBB). The initial asset mix is therefore 75-per-cent equities and 25-per-cent bonds.

If Valentino didn’t rebalance the portfolio at all, the equity weighting would have increased from 75 per cent to 88 per cent by March 31, 2023. While this is potentially dangerous in the event of a market correction, investors would have gotten away with it over the past nine years because stock market returns have generally been strong since the Great Recession. This won’t always be the case, of course.

If we accept the importance of rebalancing, how often do you need to do it? The answer appears to be no more than annually. The chart shows virtually identical results if one rebalances every quarter or every 12 months. On this basis, DIY investors who do their own rebalancing could save themselves some time and trouble by doing it a little less frequently. They might also save on transaction costs.

Frederick Vettese is a former chief actuary of Morneau Shepell and the author of the PERC retirement calculator (

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