Rebalancing w/ Quicken

by Tim Isbell, March 2013

Quicken includes a good tool for rebalancing your assets back to your the asset allocation target. This page is a walk-through of the rebalancing process. If you haven't already read the webpage that proceeds this one, go back to Asset Allocation Basics.

Here's a Quicken screen shot of a perfectly balanced portfolio. You'll never see one this perfectly balanced in real life, but it's helpful for illustration. The chart shows a 50% stocks, 50% bonds portfolio; with $10,000 in stocks and $10,000 in bonds. The dollars are distributed according to the "Asset Allocation picture" back at Asset Allocation.

After a year of investing the values of your funds will change to reflect changes in market prices of your shares, as well as to reflect reinvested dividends. So, a year later, your asset allocation chart might look like the one below. From the chart you can see that in order to get your investments all back to back within 1-2%, you need to move some money from Large Cap stocks to Domestic Bonds. That is what rebalancing is all about.

It would be great if Quicken's rebalancing tool had exactly the same categories as we are using. It comes close, but not exactly - for instance it doen't give you a way to easily see your tilt to value stocks. So it takes a little "hand analysis" to get everything back to within 1-2%. But that's good enough.

Rebalancing walk-through

Quicken integrates investment data from all accounts in all institutions so you can see the complete asset allocation in one table. To do this, Quicken automatically goes out to each individual account, wherever it is, and downloads up-to-the-day data (number of shares, share price, even the current mix of asset classes within balanced funds) without you separately logging into any of these institutions' websites. 

Here's a typical scenario of what to do at rebalance time:

  1. Print out Quicken's Rebalancing table (shown above). 
  2. Print out a Quicken Asset Allocation report that gathers all the data from all your accounts. It will be automatically organized by the same asset classes as in the table.
  3. Print out the same Asset Allocation report for each individual account.
  4. Spread all these out on a table and start annotating the individual account reports (from step 3) with what dollars need to move from which specific investment to another.
  5. Along the way, pay secondary attention to the tax consequences. For guidance, see the "Tax and Asset Allocation" section on the Asset Allocation webpage
  6. Log into the individual financial institutions' website to implement the changes. (This is one item that you cannot do through Quicken.)
This page refers to Vanguard and Quicken a lot. For more on these companies, check out their entries at Resources/Links.

Quicken offers a range of products. I've found Quicken Deluxe completely adequate for our needs. It costs about $60. I keep it current to the latest revision, which incurs another charge of about $60 every 2-3 years. If you're just beginning you can start with the lowest version Quicken offers and upgrade when you need it.

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Go on to How to Buy Stocks/Bonds.

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All the best,

Tim Isbell

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