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The first topic this morning is rebalancing. There was a question about it and a good post about it too on Seeking Alpha by James Picerno.

Having the balance you think is proper is of course important but I think that the frequency with which rebalancing needs to occur is lower than most people think.

Taking the data from Picerno's article which goes through April 6, the Russell 3000 (IWV) was up 11.55% for 12 months, iShares EAFE (EFA) was up 19.61% and iShares Lehman Aggregate Bond ETF (AGG) was up 6.07%.

Taking these three as a lazy portfolio hypothetically weighted at $45,000 in IWV, $25,000 in EFA and $30,000 in AGG on April 6, 2006. Using James' numbers IWV is worth $50,197.50, EFA is worth $29,902.50 and AGG is worth $31, 821.00 for a total of $111,921.00 on April 6, 2007.

This leaves IWV with a 44.8% weight versus a target of 45%, EFA at 26.71% weight versus a target of 25% and AGG at a 28.43% versus a target of 30%. To rebalance you need to buy $220 dollars of IWV which is about three shares, sell $1700 of EFA which is 22 shares and buy $1500 of AGG or 15 shares.

I can't say you should not rebalance at this level but I wouldn't do it. Keep in mind this is one year of results and the need to rebalance is, at a minimum, questionable.

Here's a novel concept; rebalance as the market action of your holdings dictate regardless of the calendar. I took action yesterday with a stop order of 1/3 of the position for a stock that has been white hot of late which serves as a rebalance of sorts. The trend is seems to be up so I don't want to sell, it has grown to be fairly large and if it turns I will be cutting back at price that seems high.

The other topic this morning was from a comment that asked about how to deploy a lump sum; whether to go in all at once or go in some other way like waiting for dips.

A reader or two quickly jumped in to say to go all at once and provided a link on the subject.

From a numbers standpoint going in all at once is clearly the better choice. However it is not always the most comfortable choice depending on an individual's tolerance for volatility.

I tend to wade in slowly with new accounts over the course of a couple of months for most new accounts. Most people inclined to hire a money manager would feel a lot of discomfort if they went all in, for example, on February 23rd only to be down 5% one week later.

I can't defend the concept from a numbers standpoint but it does make people feel better.

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