Its worse here, our economy is like a flailing fish, fighting for its life. The normal state of the U.S. economy is actually very bad. Because of this it goes into convulsive spasms fighting to grow any way it can out of desperation. Tricks, gimmicks, rule changes try to stimulate the economy and prevent it from falling but they only bring temporary relief to people since, when you factor in inflation we are declining.
People believe their currency has the worth it does because they have no other option. Even in a hyperinflationary environment, individuals must continue to use their hyperinflationary currency since they likely have minimal access to other currencies or gold/silver coins.
Inflation is gradually going to become part of us and due to that fact any money you keep in cash or in a low-interest account declines in value each year. Investing is the only way to make your money grow and unless you have an exceptionally high income, investing is the only way most people will ever have enough money to retire.
I've tried investing in the stock market several times but always got discouraged by fluctuations of stock value. I would be happy if you could advise me based on how you went about yours, as I am ready to go the passive income path.!!
My CFA NICOLE ANASTASIA PLUMLEE a renowned figure in her line of work. I recommend researching her credentials further... She has many years of experience and is a valuable resource for anyone looking to navigate the financial market.
Initially confused by the seemingly contradictory argument in this video vs "Why I will always.." video but eventually got it and understood the return-risk re-balance benefit key points. Thanks.
Hi, at least in Italy there are taxes to be paid when you sell on your gain, so I think it’s always better to rebalance by “buying” the losers. If you have cash to spare :)
Many of us invest in the tax-advantaged retirement accounts our countries offer. As a result there is no disincentive for us to re-balance. I just haven't done it because I hope the winners will keep winning and fear the losers will keep losing. Momentum... It is hard to have enough faith in your losers.
Momentum is an interesting point Ross. It’s real, and cutting short momentum is not a good idea. Hence why having a year gap or a trigger drift of 10%+ can still help you capture some of it. There’s lots of debate and research about different strategies tho, you can really go down a rabbit hole. It’s also important to note that this video is focused on investors using funds. Active stock pickers should already be doing this to some degree.
Yeah same. Totally understand the logic, but I just buy losers rather than sell the winners. But I have gone over the process in my head many times, so it's good to hear someone talking about it. It may sway me. 👍
@@rossmacintosh5652 good for you, in Italy we don’t have such accounts :( only specific pension funds where you can’t decide where to invest, but only on a very generic asset allocation (aggressive, balanced, etc.). We have however Vanguard LifeStrategy funds which are very efficient in terms of tax savings because you don’t have to do any balancing on your own.
Thanks James. It made a lot of sense to me. As a fairly new and near 100% equity investor (excluding cash) I'm still mulling around my allocations, so the next video will be interesting too. Cheers
You're the first to mention that developed equities are correlated with U.S. equities and that it may be better to diversify by separating developed from emerging instead of U.S. vs global funds. I'd definitely like to hear your thought on which baskets you recommend and some percentage examples. Thanks!
I look to do a rebalance every six months or when I have sold a large high return asset and offset some losses against it to weed out the ones that just aren't performing.
Nice video and you made much more sense than I do at that time of night! I try to rebalance when buying and get all my dividends paid out not reinvested so I use them where appropriate to add to the sectors I want to increase in at the time.
Thanks! Yes that works well for the first 10 years or so but after that the amount your investing each months starts to be quite insignificant compared with the overall pot so it can take a little extra tinkering!
Found your channel a week ago and cant get enough! Have setup my Vanguard account and feel great about it! Thanks very much for the solid advice James! Would love to know your views on the copy trading boom that seems to be sweeping the investor apps.
@@JamesShack There's literally a video on youtube of Peter Lynch describing Warren Buffet calling him to ask for permission to use his line in his annual shareholders letter “Selling your winners and holding your losers is like cutting the flowers and watering the weeds.” You don't mechanically buy losers, that's a sure fire way to lose money. Peter calls it diworsification and Munger regularly complains about the nonsense arguments made against concentrated portfolios. You only change course because a company's earnings are going down long term and something in your original investment thesis in the company has changed. Either its run out of steam to grow, it has no moats and competitors entering the market are eating into its profit margins or it can't generate good cash returns on operating capital employed for some other reason. That's what matters. To put it into layman's terms, can the company generate lots of cash and can it invest that cash in itself or acquisitions to grow earnings without harminag the balance sheet in the long term. If yes then its a great company to invest in, your next job is not pay too much for the future cashflows and figure out how much you're willing to pay for it i.e. discounted cashflow analysis and PE ratios. Also they're not great fans of bonds and prefer equities as they outperform them in the long run and bonds aren't necessarily lower risk if you don't know what you're doing, in a rising interest rate environment such as now you can make big mistakes as bond prices and interest rates have an inverse relationship, see the imbeciles at Silicon Valley Bank for example. This video is giving bad advice to amateurs and risks them losing out on those key days in the market when it goes up and makes a paltry return into a great one, further you're adding more costs by having them trade more vs a passive index fund for example that beats most managed funds in the long term anyway. For people who don't want to do the work to stock pick then a passive S&P 500 index fund and getting on with life is best, you'll double your money roughly every ten years as per the average return of the S&P over the last 70 years, just don't put any cash in that you need in the short term and have a cash buffer and you're good to ride out the peaks and troughs of the market on the way up.
Apparently professional investors are more likely to cut losses and let winners run. Most amateurs can't face crystallising a loss, and they love to book a profit. I only own collective investments, but when I realised (or thought) I'd made a mistake with Glasgow Income I cut it. However, I sat on 40% losses for nearly two years with Foreign and Colonial Commercial Property Trust. Nearly back in the black now!
Hi James. Awesome videos. Would you consider to do a video about moving averages and if it is possible use them to time markets crashes (and when to buy into the market) using for example 80 day moving average against the S&P500 itself?
It's not something i know munch about, but i can certainly look into the data and see if there is anything there. The thing is that all of these "ideas" that we come up with for timing the market have already been thought of by other professional investors. And when they find one that works they plow so much money into it that it quickly becomes in-effective. So it's vrey very hard to find this stuff now, unless you're very good at programming and using AI!
Great video. I've been watching and learning from your videos. Eassily some of the best investing videos out there. Question/future video. I want to get rid of bonds. For the past 20+ year bonds have been great at reducing risk and your overall Rate of Return. My plan is to replace bonds with real estate. Currently we have real estate holdings that provide passive income at approximately 8% cash on cash per year, plus they carry the possibility of a larger equity payout upon sale, which happens after the asset is depreciated at about 10 years. So if we generated enough income to get by in down stock market years is this a solid plan? Or is real estate and equities too tightly correlated, thus highly risky? Even in the housing bust rents stayed high as people always need somewhere to live. The remaining equity portfolio would then be freed up allowing for greater risk since proceeds would be nice to have but not necessarily. That is as long as real estate investments continued to produce. Stocks would be a mix of ETFs such as VOO, VUG, VXUS and a small % of higher risk ETFs. 10-15 years to retirement. Curious what your thoughts are on positioning a portfolio in such a way. Thanks, and please keep up the vids. Matt
Hi James, great video as always. Can I just ask how this might apply to someone who's holding just 2 vanguard funds, eg the global all cap and developed world ex-uk funds. There is overlap between the funds obviously, so how would one go about rebalancing that? Thanks
Hi, as you say there is quite a big overlap between those two funds. Firstly, is there any particular reason you’re holding both? Are you looking to be more exposed to developed markets? Rebalancing between these two is more of an asset allocation decision. Decide by much do you want to be overweight developed markets and rebalance whenever that gets out of line.
@@JamesShack The reason I ended up with those 2 funds is because I started off with the global all cap, but later realised that the developed world fund has considerably lower costs, so I thought it might be a good way to get more exposure to developed markets. Thanks, that makes sense about reallocating accordingly. Hope you don't think my strategy is ridiculous!
Lets say that you own: ABC, $200k balance, up 40% over the past 12 months XYZ, $100k balance, up 20% over the past 12 months You sell $50k of ABC and buy $50k of XYZ. Now each has a balance of $150k. You are "positioning" yourself for the next 12 months.
Another good video James. You mentioned possibly rebalancing once a year, most logically I'd probably do this either just before or after the financial year From your experience, would you say it's better to do this at the start or end of a finance year? My logic is that in March you might rushing to ensure your finances are in line (i.e. you'll be more stressed/emotional) Whereas in April you'll be more relaxed and looking to set yourself up for the next year. Or would you say that it doesn't really matter?
March is generally best, then you already know what other gains you have naturally released for the year. So can harvest other gains up to your CGT allowances. Then you should also make sure to use up any tax wrapper allowances right after the end of the tax year.
Please let me know if you have any questions about this. Your questions and my follow up answers, will help future viewers make better sense of the topic!
It does seem that ETF re-balancing between, say, broad themes (S&P, Value, Emerging Markets,Small Cap, Growth, etc.) makes sense but it seems far more difficult with individual stocks. I can foresee the benefits if you still have long-term conviction regarding your losers but if you don't it seems re-balancing could introduce even more risk. For instance several years ago my broker recommended Nortel stock after it had suffered some significant declines. He thought it would be a turn around story. On his advise I bought some only to see it decline to bankruptcy. Re-balancing and buying more of that loser would have been a big mistake!
@@rossmacintosh5652 yes you’re right. This video is mainly aimed at fund or index investors. However if you’re an active stock picker, and doing it properly, this should already be taken into consideration. You can’t simply try to invest in good companies, you need to hold good companies that complement each other. This is why star fund managers tend not to outperform over long periods of time. Each has their own style of investing, value growth income etc, but each style comes in and out of favour over time. Each had its time in the sun. Fortunately for these fund managers they can just shut down their fund when it starts to underperform and start again. Unfortunately you can’t do that with your retirement fund, which is why it’s important to have diversity across styles and risk factors! Or you can just back yourself to pick which style will come in to favour at which point… harder still.
OK Mark, So I sell enough Vanguard funds outside of ISA to release £12,300 profits each for wife and myself on March 1st releasing our Capital Gains allowance immediately re- investing into any NEW Vanguard holding fund rather than leaving in cash and then re-balance back onto the previous funds that we are happy with on 5th or 6th April, putting a separated/new £20,000 each onto our anual ISA allowance on or after the 6th April.
@@raybrock2513 pretty much. You can also switch between funds of the same type eg vanguard S&P 500 etf for a blackrock S&P 500 etf. Also remember to transfer assets between you and your wife if one of you has no gains to realise.
Could I not just buy more of my stocks that are doing badly. eg current value 117.5, HL Buy up to 175, buy more of these at the low price to compromise my losses in this stock. I am very new ( April 2021) and so much to learn. Thanks for the great videos
Could I not just buy more of my stocks that are doing badly. Yes. Re-balancing is based on the philosophy that "this years winner will not be next years winner."
Hi James, great video. What about rebalancing now when all stocks are down. I have a Bally Guilford fund which is down 20% while others are only down 2-3%. Does it make sense to sell and buy into a fund which has dropped in value more than others? Many thanks
Only if you believe in that allocation. Typically yes, you should rebalance you strategy at least once a year. But you have to have conviction that is the right strategy in the first place.
We typically rebalance and take gains at the same time. It’s best to do it just before the end of the tax year so you know how many gains you’ve already released during the year. The other important point is when subscribing for your ISA right after the end of the tax year. But you can normally do all of this bridging the tax year. This is why tax year end is so busy for financial planners!
Hi James, I have a general query if I may - not necessarily linked to this particular video. I am retired. Currently invested in portfolio fund A with a current -14% result and my new adviser is suggesting another portfolio (B), which is down -4%. Question: simplistically- if I moved from A to B, will I be locking in the -10% loss by having to buy portfolio B? Should I therefore stay with A until it recovers?? Thank you. Peter.
@@JamesShack I don’t know why it appeared crossed out. It should not be. I have asked the question but wanted to get your opinion too… In general, how can you ensure moving portfolios is not detrimental?
James , interesting but still hard to understand and believe. Shouldn’t I expect that equal weight ETF should outperform market weighted ETF? If I do compare equal weight S&P 500 ETF (eg Xtrackers, rebalancing all 3 months) with iShares Core S&P 500 ETF since 2014 (I couldn’t find old data) than iShare Core is strongly outperforming equal weighted ETF (186% vs 150%). Is this a coincidence due to the relative performance of the big Tec companies in the last years or what do I get wrong? Are you still saying that investing in an equal weight portfolio should create a better performance than a market cap based ETF? Thanks
The S&P 500 is all large cap, and a fairly even split between growth and value. Which means that an equal weight fund is not getting much benefit from rebalancing at all. What you say is true, growth stocks have outperformed for a long run, but they won't for ever, and it's when the winds change, and these risk factors revert back towards their means, that you get the benefits of rebalancing.
Shouldn’t I expect that... The key word here is “expect.” Re-balancing is based on the philosophy that '"This years winner will not be next years winner."
@@JamesShack hi James, how should I change my Buy and hold ETF portfolio (simple all-world ETF Vanguard) to achieve the benefits from your analysis? Thanks
@@JamesShack Sounds Good, but I thought Vanguard All World ETF weight of stocks is simply based on market capitalization. That means if the today very high valued technology stocks would decline relative to so far underperforming stocks the Vanguard All world ETF performance would decrease relatively. I thought that the better method would be to sell partially today the very high rated stocks and invest in underrated stocks. What do I get wrong?
Its worse here, our economy is like a flailing fish, fighting for its life. The normal state of the U.S. economy is actually very bad. Because of this it goes into convulsive spasms fighting to grow any way it can out of desperation. Tricks, gimmicks, rule changes try to stimulate the economy and prevent it from falling but they only bring temporary relief to people since, when you factor in inflation we are declining.
People believe their currency has the worth it does because they have no other option. Even in a hyperinflationary environment, individuals must continue to use their hyperinflationary currency since they likely have minimal access to other currencies or gold/silver coins.
Inflation is gradually going to become part of us and due to that fact any money you keep in cash or in a low-interest account declines in value each year. Investing is the only way to make your money grow and unless you have an exceptionally high income, investing is the only way most people will ever have enough money to retire.
I've tried investing in the stock market several times but always got discouraged by fluctuations of stock value. I would be happy if you could advise me based on how you went about yours, as I am ready to go the passive income path.!!
My CFA NICOLE ANASTASIA PLUMLEE a renowned figure in her line of work. I recommend researching her credentials further... She has many years of experience and is a valuable resource for anyone looking to navigate the financial market.
Just ran an online search on her name and came across her websiite; pretty well educated. thank you for sharing.
Initially confused by the seemingly contradictory argument in this video vs "Why I will always.." video but eventually got it and understood the return-risk re-balance benefit key points. Thanks.
Hi, at least in Italy there are taxes to be paid when you sell on your gain, so I think it’s always better to rebalance by “buying” the losers. If you have cash to spare :)
This is an important point yes, lots of the time you can rebalance by simply investing cash as you save. Thanks!
Many of us invest in the tax-advantaged retirement accounts our countries offer. As a result there is no disincentive for us to re-balance. I just haven't done it because I hope the winners will keep winning and fear the losers will keep losing. Momentum... It is hard to have enough faith in your losers.
Momentum is an interesting point Ross. It’s real, and cutting short momentum is not a good idea. Hence why having a year gap or a trigger drift of 10%+ can still help you capture some of it. There’s lots of debate and research about different strategies tho, you can really go down a rabbit hole.
It’s also important to note that this video is focused on investors using funds. Active stock pickers should already be doing this to some degree.
Yeah same. Totally understand the logic, but I just buy losers rather than sell the winners. But I have gone over the process in my head many times, so it's good to hear someone talking about it. It may sway me. 👍
@@rossmacintosh5652 good for you, in Italy we don’t have such accounts :( only specific pension funds where you can’t decide where to invest, but only on a very generic asset allocation (aggressive, balanced, etc.).
We have however Vanguard LifeStrategy funds which are very efficient in terms of tax savings because you don’t have to do any balancing on your own.
Thank you, now I have 60% of AMC on my portfolio
Thanks James. It made a lot of sense to me. As a fairly new and near 100% equity investor (excluding cash) I'm still mulling around my allocations, so the next video will be interesting too. Cheers
Thanks for watching robert, i think it may be the one after next now, as there's another interesting angle I want to cover!
That was so neatly explained and informative. Thank you James.
Thanks Richard, you're welcome.
You're the first to mention that developed equities are correlated with U.S. equities and that it may be better to diversify by separating developed from emerging instead of U.S. vs global funds. I'd definitely like to hear your thought on which baskets you recommend and some percentage examples. Thanks!
Such great, well informed videos, keep up the great work.
Can you do a video of self employed SIPP’s vs S&S ISA.
Thank you! Yes i will do.
I look to do a rebalance every six months or when I have sold a large high return asset and offset some losses against it to weed out the ones that just aren't performing.
Superb vid , I’ll write that on a post it and stick it on the fridge. Trouble is I’m so rubbish at stock picking all mine are big losers . Thanks.
Haha!
Yet another great video. Thank you. Definitely worth watching a third time.
Nice video and you made much more sense than I do at that time of night! I try to rebalance when buying and get all my dividends paid out not reinvested so I use them where appropriate to add to the sectors I want to increase in at the time.
Thanks! Yes that works well for the first 10 years or so but after that the amount your investing each months starts to be quite insignificant compared with the overall pot so it can take a little extra tinkering!
awesome James! you have just become my go to finance guru guy
another great video with loads of good information 👍🏼
Thanks steve!
I wish I had watched your videos before I listen to my son who was learning to invest. Emotional blind love
Found your channel a week ago and cant get enough! Have setup my Vanguard account and feel great about it! Thanks very much for the solid advice James!
Would love to know your views on the copy trading boom that seems to be sweeping the investor apps.
Very good explanation. New sub. Was recommended your channel by a chum... it's a good pick :)
Hey! I’ve seen your videos a few times, keep up the good work!
Peter Lynch watching this video and face palming.
Peter Lynch and warren buffet would recommend this to 99.9% of people.
@@JamesShack There's literally a video on youtube of Peter Lynch describing Warren Buffet calling him to ask for permission to use his line in his annual shareholders letter “Selling your winners and holding your losers is like cutting the flowers and watering the weeds.”
You don't mechanically buy losers, that's a sure fire way to lose money.
Peter calls it diworsification and Munger regularly complains about the nonsense arguments made against concentrated portfolios. You only change course because a company's earnings are going down long term and something in your original investment thesis in the company has changed. Either its run out of steam to grow, it has no moats and competitors entering the market are eating into its profit margins or it can't generate good cash returns on operating capital employed for some other reason. That's what matters.
To put it into layman's terms, can the company generate lots of cash and can it invest that cash in itself or acquisitions to grow earnings without harminag the balance sheet in the long term. If yes then its a great company to invest in, your next job is not pay too much for the future cashflows and figure out how much you're willing to pay for it i.e. discounted cashflow analysis and PE ratios.
Also they're not great fans of bonds and prefer equities as they outperform them in the long run and bonds aren't necessarily lower risk if you don't know what you're doing, in a rising interest rate environment such as now you can make big mistakes as bond prices and interest rates have an inverse relationship, see the imbeciles at Silicon Valley Bank for example. This video is giving bad advice to amateurs and risks them losing out on those key days in the market when it goes up and makes a paltry return into a great one, further you're adding more costs by having them trade more vs a passive index fund for example that beats most managed funds in the long term anyway.
For people who don't want to do the work to stock pick then a passive S&P 500 index fund and getting on with life is best, you'll double your money roughly every ten years as per the average return of the S&P over the last 70 years, just don't put any cash in that you need in the short term and have a cash buffer and you're good to ride out the peaks and troughs of the market on the way up.
Good video, thank you
No, thank you for watching!
¡Cheers, Jamón Ibérico!
Always a welcome comment!
Thanks again James
Another amazing video, with a great explanation!
Just curious, what camera do you use to shoot your videos?
I use a Nikon Z6, probably a bit overkill for what i do!
So well explained, I’ve been trying to make sense of this for a while!
I’m glad it helped!
Apparently professional investors are more likely to cut losses and let winners run. Most amateurs can't face crystallising a loss, and they love to book a profit. I only own collective investments, but when I realised (or thought) I'd made a mistake with Glasgow Income I cut it. However, I sat on 40% losses for nearly two years with Foreign and Colonial Commercial Property Trust. Nearly back in the black now!
Craig you have clearly sat thorough at least an hours of my videos ? Why ?
@@JamesShack No worries. I've just stopped.
@@craigross341 👍🏻I’m a beta guy. Fuk off with your alpha shit….. c / thanks you for the channel support
Hi James. Awesome videos. Would you consider to do a video about moving averages and if it is possible use them to time markets crashes (and when to buy into the market) using for example 80 day moving average against the S&P500 itself?
It's not something i know munch about, but i can certainly look into the data and see if there is anything there. The thing is that all of these "ideas" that we come up with for timing the market have already been thought of by other professional investors. And when they find one that works they plow so much money into it that it quickly becomes in-effective. So it's vrey very hard to find this stuff now, unless you're very good at programming and using AI!
Great video. I've been watching and learning from your videos. Eassily some of the best investing videos out there.
Question/future video. I want to get rid of bonds. For the past 20+ year bonds have been great at reducing risk and your overall Rate of Return. My plan is to replace bonds with real estate. Currently we have real estate holdings that provide passive income at approximately 8% cash on cash per year, plus they carry the possibility of a larger equity payout upon sale, which happens after the asset is depreciated at about 10 years. So if we generated enough income to get by in down stock market years is this a solid plan? Or is real estate and equities too tightly correlated, thus highly risky? Even in the housing bust rents stayed high as people always need somewhere to live. The remaining equity portfolio would then be freed up allowing for greater risk since proceeds would be nice to have but not necessarily. That is as long as real estate investments continued to produce. Stocks would be a mix of ETFs such as VOO, VUG, VXUS and a small % of higher risk ETFs. 10-15 years to retirement. Curious what your thoughts are on positioning a portfolio in such a way.
Thanks, and please keep up the vids.
Matt
Am I right in thinking, if you invest in a life strategy from Vanguard, the rebalancing is done automatically? Love your content btw
Yes that is right
How is the Vanguard 100% rebalanced? Just the value of each fund weight within?
Yes, and then depending on the sub fund there may be be some rebalancing within it.
Thanks Jimmy
Thanks max. I hope you're well!
Hi James, great video as always.
Can I just ask how this might apply to someone who's holding just 2 vanguard funds, eg the global all cap and developed world ex-uk funds. There is overlap between the funds obviously, so how would one go about rebalancing that? Thanks
Hi, as you say there is quite a big overlap between those two funds. Firstly, is there any particular reason you’re holding both? Are you looking to be more exposed to developed markets?
Rebalancing between these two is more of an asset allocation decision. Decide by much do you want to be overweight developed markets and rebalance whenever that gets out of line.
@@JamesShack The reason I ended up with those 2 funds is because I started off with the global all cap, but later realised that the developed world fund has considerably lower costs, so I thought it might be a good way to get more exposure to developed markets. Thanks, that makes sense about reallocating accordingly. Hope you don't think my strategy is ridiculous!
Lets say that you own:
ABC, $200k balance, up 40% over the past 12 months
XYZ, $100k balance, up 20% over the past 12 months
You sell $50k of ABC and buy $50k of XYZ. Now each has a balance of $150k. You are "positioning" yourself for the next 12 months.
Another good video James. You mentioned possibly rebalancing once a year, most logically I'd probably do this either just before or after the financial year
From your experience, would you say it's better to do this at the start or end of a finance year?
My logic is that in March you might rushing to ensure your finances are in line (i.e. you'll be more stressed/emotional) Whereas in April you'll be more relaxed and looking to set yourself up for the next year. Or would you say that it doesn't really matter?
March is generally best, then you already know what other gains you have naturally released for the year. So can harvest other gains up to your CGT allowances. Then you should also make sure to use up any tax wrapper allowances right after the end of the tax year.
There is no end of year or beginning of year advantage. July to July is a good as January to January.
Please let me know if you have any questions about this. Your questions and my follow up answers, will help future viewers make better sense of the topic!
It does seem that ETF re-balancing between, say, broad themes (S&P, Value, Emerging Markets,Small Cap, Growth, etc.) makes sense but it seems far more difficult with individual stocks. I can foresee the benefits if you still have long-term conviction regarding your losers but if you don't it seems re-balancing could introduce even more risk. For instance several years ago my broker recommended Nortel stock after it had suffered some significant declines. He thought it would be a turn around story. On his advise I bought some only to see it decline to bankruptcy. Re-balancing and buying more of that loser would have been a big mistake!
@@rossmacintosh5652 yes you’re right. This video is mainly aimed at fund or index investors. However if you’re an active stock picker, and doing it properly, this should already be taken into consideration. You can’t simply try to invest in good companies, you need to hold good companies that complement each other.
This is why star fund managers tend not to outperform over long periods of time. Each has their own style of investing, value growth income etc, but each style comes in and out of favour over time. Each had its time in the sun. Fortunately for these fund managers they can just shut down their fund when it starts to underperform and start again.
Unfortunately you can’t do that with your retirement fund, which is why it’s important to have diversity across styles and risk factors! Or you can just back yourself to pick which style will come in to favour at which point… harder still.
OK Mark,
So I sell enough Vanguard funds outside of ISA to release £12,300 profits each for wife and myself on March 1st releasing our Capital Gains allowance immediately re- investing into any NEW Vanguard holding fund rather than leaving in cash and then re-balance back onto the previous funds that we are happy with on 5th or 6th April, putting a separated/new £20,000 each onto our anual ISA allowance on or after the 6th April.
@@raybrock2513 pretty much. You can also switch between funds of the same type eg vanguard S&P 500 etf for a blackrock S&P 500 etf. Also remember to transfer assets between you and your wife if one of you has no gains to realise.
I think ill "rebalance" by just throwing nore money at my underwighted assets to not sell and trigger taxes
Could I not just buy more of my stocks that are doing badly. eg current value 117.5, HL Buy up to 175, buy more of these at the low price to compromise my losses in this stock. I am very new ( April 2021) and so much to learn. Thanks for the great videos
Hi Stephen, Do not try to apply this to individual stock picking, this should only be done on an overall asset allocation basis.
Could I not just buy more of my stocks that are doing badly.
Yes. Re-balancing is based on the philosophy that "this years winner will not be next years winner."
How many times in a year should you rebalance?
Am I right in thinking, if you invest in a life strategy from Vanguard, the rebalancing is done automatically? Love your content btw
Yes that's right.
Hi James, great video. What about rebalancing now when all stocks are down. I have a Bally Guilford fund which is down 20% while others are only down 2-3%. Does it make sense to sell and buy into a fund which has dropped in value more than others? Many thanks
Only if you believe in that allocation. Typically yes, you should rebalance you strategy at least once a year. But you have to have conviction that is the right strategy in the first place.
@@JamesShack great thanks appreciate the advice.
I intend to rebalanced and take capital gains every year.
Is the nest time to do this just before April5 and rebalanced 1 month later?
We typically rebalance and take gains at the same time. It’s best to do it just before the end of the tax year so you know how many gains you’ve already released during the year. The other important point is when subscribing for your ISA right after the end of the tax year. But you can normally do all of this bridging the tax year. This is why tax year end is so busy for financial planners!
There is no end of year or beginning of year advantage. July to July is a good as January to January.
Hi James, I have a general query if I may - not necessarily linked to this particular video. I am retired. Currently invested in portfolio fund A with a current -14% result and my new adviser is suggesting another portfolio (B), which is down -4%. Question: simplistically- if I moved from A to B, will I be locking in the -10% loss by having to buy portfolio B? Should I therefore stay with A until it recovers?? Thank you. Peter.
Hi Peter, did you say you were working with a financial adviser? Part of your comment is crossed out.
@@JamesShack I don’t know why it appeared crossed out. It should not be. I have asked the question but wanted to get your opinion too… In general, how can you ensure moving portfolios is not detrimental?
James , interesting but still hard to understand and believe. Shouldn’t I expect that equal weight ETF should outperform market weighted ETF? If I do compare equal weight S&P 500 ETF (eg Xtrackers, rebalancing all 3 months) with iShares Core S&P 500 ETF since 2014 (I couldn’t find old data) than iShare Core is strongly outperforming equal weighted ETF (186% vs 150%). Is this a coincidence due to the relative performance of the big Tec companies in the last years or what do I get wrong? Are you still saying that investing in an equal weight portfolio should create a better performance than a market cap based ETF? Thanks
The S&P 500 is all large cap, and a fairly even split between growth and value. Which means that an equal weight fund is not getting much benefit from rebalancing at all. What you say is true, growth stocks have outperformed for a long run, but they won't for ever, and it's when the winds change, and these risk factors revert back towards their means, that you get the benefits of rebalancing.
Shouldn’t I expect that...
The key word here is “expect.” Re-balancing is based on the philosophy that '"This years winner will not be next years winner."
@@JamesShack hi James, how should I change my Buy and hold ETF portfolio (simple all-world ETF Vanguard) to achieve the benefits from your analysis? Thanks
@@odilostark7130 hi! You don’t really need to do anything, if your in an all world fund it will already be rebalancing within in. Every day I imagine.
@@JamesShack Sounds Good, but I thought Vanguard All World ETF weight of stocks is simply based on market capitalization. That means if the today very high valued technology stocks would decline relative to so far underperforming stocks the Vanguard All world ETF performance would decrease relatively. I thought that the better method would be to sell partially today the very high rated stocks and invest in underrated stocks. What do I get wrong?
Succinctly put!
Thanks Chris!
you dont have to put the camera that close to your face ha.