Time to Rebalance Your Portfolio: Sell U.S. Small Value and Buy Emerging Markets
Lawrence Weinman submits:
As I have mentioned in several articles, there is a rebalancing premium whereby rebalancing back to target allocation allows one to "sell high" and "buy low" by selling asset classes that have performed strongly enough to grow above the target allocation and vice versa.There are several methodologies for doing this ranging from the simpler to the more complex:
- Rebalance annually.
- Rebalance quarterly.
- Rebalance whenever an asset class has moved a designated percentage away from the target allocation.
With client portfolios I do a mix of 2 and 3. Currently there is a good rationale for selling some small cap value ETFs (VBR, PRFZ, IWD) and purchasing emerging markets ETFs (VWO, EEM and GMF emerging Asia). In fact, several opportunities have existed to do this a bit earlier in the quarter but it still looks attractive. I wrote on March 1 that managers were moving out of emerging markets offeringComplete Story »