Rebalance

Rebalancing is the path from one’s current holdings to the Strategy’s allocation objective.

In Flow Allocator the rebalancing views show the trades required in each account to achieve a rebalance.

Sales are listed first, in descending order by size. Then purchases, also in the same order.

See the account’s “Rebalance Summary” to see how these numbers are arrived at.

The Rebalance Bubble

Each ‘bubble’ displays the current status of the asset class, plus the actions required to rebalance.

Sales

The footer is the name of the asset class. The upper right contains the total amount of securities to be liquidated from the asset class.

One or more ‘trash cans’ will be listed showing individual positions to liquidate. An approximate share count may be listed, based on the share price in the Securities table.

The ‘+/-’ shows the approximate gain (or loss) from the trade(s).

The ‘W’ indicates potential wash sales. Making the trade may sacrifice some (or all) of the tax deduction. (Consult the relevant literature for all the details.)

Purchases

The footer is the name of the asset class. The upper right contains the total amount of securities to be purchased for the asset class.

A ‘shipping box’ may be present listing your current holdings in the asset class, including the tickers.

A ‘shopping cart’ will list the amount to be purchased.

The ‘W’, if present, indicates potential wash purchases, meaning that there was a recent sale at a loss in a taxable account. Preserving this tax loss can benefit your portfolio performance. (Consult the literature to learn how to do this.)

Export

The rebalance export will be a zip file containing delimited tables:

  • purchases.csv - purchases required by the rebalance
  • sales.csv - sales required by the rebalance
  • trading-allocations.csv - allocated amounts for trading accounts
  • non-trading-allocations.csv - allocated amounts for non-trading accounts

…adhering to the schemas:

Also included is a params.json file that contains the participating accounts and asset classes, and the flow value.

Setup

Available in the Rebalance View from the Strategy View.

Minimum Sale Amount

If the liquidation(s) for an asset class in an account is less than this value, it will not be listed in the rebalance.

Minimum Position Size

To avoid leaving behind tiny positions, set this value as needed.

A liquidation may be larger than needed to ‘clean up’ any residual positions. In the SELL bubble, look for the ‘ALL’ in place of an approximate number of shares.

Advanced Features

The advanced features will have a big impact on rebalancing. For example, Roll-up Assets and Group Related Holdings can help retain holdings that might otherwise need to be liquidating in a rebalance.

More specifically…

Optimization

By sorting on ‘Transactions’ and ‘Sale Volume’ the amount of trading needed to rebalance can be minimized.

When provided with recent transaction history, optimization can also sort on ‘Wash Sale’ to minimize wash sales that result from liquidating positions in taxable accounts where there has recently been a related purchase.

Reduce Rebalance

Consolidation’s “Reduce Rebalance” feature matches liquidations with purchases of related asset classes in an account’s rebalance. Where present, one can offset the other.

For example, if the rebalance calls for liquidating $10K of VB (Small Cap) and purchasing $8K of VTI (Total Market), these are close enough to reduce to a $2K liquidation of VB.

This offsetting of related trades can also reduce potential wash sales.