more than is needed for the perfect picture. So you sell part of your local stocks. Last, the ideal share of international bonds can be calculated as $115,000 x 20% = $23,000. Since you currently only have $16,500, you are missing
$6,500
($23,000 – $16,500) from that category of securities. Now you bring into play (a) the money you made from selling your excess local shares, and (b) the influx of
$5,000
you put into making your portfolio worth $115,000 (instead of its year-end value of $110,000).
Assume you decided to buy a $100 package of shares: $6500 / $100 per share = 65 additional shares bought to restore the balance.
Order list for rebalancing
The key to automated rebalancing is to generate a list of orders and then execute them automatically. Think about this for a moment: whether the need for rebalancing arises due to time or threshold reasons, the program will suggest which stocks to buy to bring it up to the value of depreciated stock and thus bring the weights back to normal.
Let’s say that after a while you see that the value of corporate bonds grew. On the one hand, you’d need to sell
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