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How often do you update your recommended portfolios? |
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November 13, 2009 |
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Question:
I just found your model portfolios at FundAdvice.com and I wish to use your ETF recommendations. I have three basic questions:
• How often are these portfolios updated on your web site?
• How often do you recommend rebalancing the ETF portfolios?
• Do you plan to continue publishing these portfolios on the web site for the foreseeable future?
Click here to read Merriman's answer!
RICHARD BUCK:
I’m glad you found these portfolios and I hope you will find them useful. I think the answers to your questions are pretty simple.
• We don’t have any set schedule for updating these portfolios. Our intention is to issue recommendations and have them be good forever without change. However in real life, things happen. Mutual funds close to new investors or increase their minimum initial investment and holding period requirements. (I don’t think these are problems with ETFs.) New funds become available that do a better job in some respect than what we had before. So we change the portfolios when there’s a good reason to do so, but not just for the sake of change. If you see a change, you should not necessarily regard it as a recommendation to ditch recommended funds that you already own.
• In general, we recommend rebalancing once a year, and there is no particular time it should be done. One good approach is to do it during the week of your birthday. You can consider it a present you give to yourself. Because you will pay trading costs with ETFs, there is a point below which it is not cost-effective to make the trades necessary to rebalance. If your allocations are off by one or two percentage points and it would cost you $20 to get them into line again, that makes sense in a $50,000 portfolio but probably not in a $2,000 portfolio. You will have to use your judgment on that.
• We have no plans to drop the model portfolios.
Richard Buck is publications manager for Merriman.
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