Re-balancing your index funds over time?

MNP · July 21, 2020, 1:48pm

Hey Jeremy,
Appreciate all the awesome info you are providing folks. You keep it simple for all to understand while making it fun to read.

I’m a Canadian so this applies to Canadians that follow you.

If I’m currently buying vgro which has 20% bonds. When I am ready due to age to switch to vbal which is 40% bonds.
Do I sell what I have accumulated in vgro to buy more vbal? Or do I let my vgro continue growing and not sell until I retire? Not sure if it makes a difference when it comes to dividends or anything else that I may have missed.
Thanks!

Jeremy · July 22, 2020, 2:32am

Hey @MNP!

The more I research questions like this, the more I come to the conclusion: It doesn’t really matter. I generally think the most simple plan is likely to make you the most money.

i.e. maybe on your 55th birthday, you sell 100% of VGRO and put it all into VBAL, along with all future investments. Since they’re 80% the same, and both follow the same market, it’s not going to represent a huge shock to your investing timeline.

If that seems dramatic, I’d suggest making a plan, then sticking to it. i.e. Maybe on your 50th birthday, all new investing goes into VBAL, until you reach a certain target asset allocation.

What I would avoid is switching strategies or reacting to the market. That type of reactive behavior is more likely to hurt you than any benefit you can get from perfecting the exact asset allocation.