The positions in the Sector Conservative model fall within 28.4% and 40.5% of the portfolio. With the exception of the TAN position, the other portfolio slots are fairly closely balanced. The ETF models will make minor adjustments on July 1st to bring them back into balance, however, particularly if you were trading a smaller sized portfolio, it might not be necessary or cost-efficient to rebalance positions that are this close.
We allow this drift to naturally occur between our twice annual rebalancing in January and July. Sometimes the differences aren’t as pronounced. It all depends on how the trades have performed. If you haven’t been employing the same money management and position sizing as the models, the position sizing differences in your portfolio might not be significant enough to warrant the time and trading costs of rebalancing your portfolio. For small accounts, it is probably not worth it to pay additional commissions or trading fees to rebalance if it means buying or selling only a few shares.
The mechanics of rebalancing your portfolio are fairly simple. For a model with three portfolio slots, the goal is to get each portfolio slot/position to equal 1/3rd of your portfolio (less if it’s a partial position from profit taking). For the ETF Complete, each portfolio slot/position would be 1/9th (or 11%) of the total portfolio.
For the Sector Moderate portfolio, the cash is from profit taking in TAN and that cash should be considered part of the TAN position / portfolio slot for purposes of rebalancing.
Once you know the correct balanced allocation, it’s just a matter or buying or selling shares of the right ETFs to bring your positions up or down to the right percentages.
For the Sector Conservative portfolio, as it sits right now, the Sample $5,000 portfolio would sell 12 shares of TAN and then use the proceeds to buy 5 shares of GDX and 6 shares of XHB. For a $5,000 portfolio, it might not be worth it to adjust the portfolio, however, if the portfolio was significantly larger, the trading costs will be a negligible amount.