CLEC Investment & Wealth DatabaseSmart Rebalancing Method
Smart Rebalancing Method
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Smart rebalancing method:
Smart rebalancing method:
In up years, transfer 30% (or 50%) of that year's gains from the 2x leveraged fund into money market funds or short-term bonds. Unless you are more conservative than the teacher, using 30% for smart rebalancing tends to produce better long-term performance.
In down years, move an amount equal to 2% of total investment assets from money market funds or short-term bill funds into the 2x leveraged fund. Total investment assets means the base fund plus leveraged funds plus money market funds or short-term bill funds.
If your initial asset allocation is 10 million, your 2% is 200,000. Whether your assets become 5 million or 30 million, smart rebalancing will always use 200,000.
Definition of an up year: the stock price of QQQ (00662) on December 31, 2024 is higher than the stock price on January 1, 2024. On the first trading day of 2025, transfer 30% (or 50%) of the 2024 gains from 00670L to 00864B.
(If you transfer 30%, volatility will gradually increase. If you transfer 50%, volatility remains unchanged.)
The definition of a down year: The stock price of QQQ (00662) on December 31, 2024 is lower than the stock price on January 1, 2024. Sold 00864B for 200,000 and bought 00670L for 200,000.
Calculation of profit for the year for general leveraged funds: the closing assets of the leveraged fund at the end of the year minus the opening assets of the leveraged fund at the beginning of the year, minus the newly invested funds in the leveraged fund that year.
Smart rebalancing can be done without new funds or rebalancing.
For example, if you start with one million,
400,000 QQQ
300,000 QLD
300,000 money market fund
In the first year, after one year (you do not invest any more money.) the market rises and your assets become
450,000 QQQ
360,000 QLD
310,000 money market funds
Rebalance based on smart
QLD earned 60,000. 30% of 60,000 is 20,000, so sell 20,000 of QLD, leaving 340,000 in QLD. Then use that 20,000 to buy the money market fund, bringing the money market fund to 330,000.
After balancing, the assets become
450,000 QQQ
340,000 QLD
330,000 money market funds
This is 30% smart rebalancing in an up year.
The market fell in the second year and the following year, and at the end of the year the asset fell from to the following asset
405,000 QQQ
288,000 QLD
340,000 money market funds
Smart rebalancing at the end of the year is to multiply the initial million by 2% to get 20,000..
Sell 20,000 money market funds, and the money market funds become 320,000. Then transfer the 20,000 to QLD, and QLD becomes 308,000. The new asset allocation becomes
405,000 QQQ
308,000 QLD
320,000 money market funds
The above is that even without new funds, smart rebalancing can be done.
Disclaimer
All email video content and reply information are for reference only. I am not a professional investment consultant, nor a professional tax preparer. All information is only a sharing of personal experience. You must be cautious when investing. You must be responsible for your investment and any decisions and actions.
Written by: James.