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Rebalancing the 7Twelve Portfolio
The frequency of rebalancing affects performance. It also affects tax-efficiency if the account is not in a tax-protected status such as an IRA or 401k. As shown below, rebalancing the Active and Passive 7Twelve portfolio annually (at the end of each year) generally outperforms a monthly or quarterly rebalancing frequency.
Monthly 7Twelve performance updates reported on this web site necessarily must utilize a monthly rebalancing protocol. As a result, performance figures for the 7Twelve portfolio will typically be reported with the assumption of monthly rebalancing in the 7Twelve Research Report and on the 7Twelve web site. This does not imply that monthly rebalancing is the recommended frequency, but rather to facilitate the performance reporting on a monthly basis. If I were to recommend a rebalancing frequency, it would be annually.
The performance figures reported in my forthcoming book, 7Twelve: A Diversified Investment Portfolio with a Plan (John Wiley & Sons, summer 2010), represent the Passive 7Twelve portfolio with annual rebalancing. The 7Twelve Analysis software (Excel template) also assumes annual rebalancing.
Annual % Performance Based on
Three Different Rebalancing Frequencies
| Calendar Year |
Active 7Twelve |
Passive 7Twelve |
| Monthly Rebalancing* |
Quarterly Rebalancing |
Annual Rebalancing |
Monthly Rebalancing* |
Quarterly Rebalancing |
Annual Rebalancing** |
| 2000 |
10.91 |
10.76 |
11.71 |
6.35 |
6.05 |
6.78 |
| 2001 |
3.21 |
3.64 |
3.13 |
–1.37 |
–0.94 |
–1.58 |
| 2002 |
2.21 |
2.55 |
2.27 |
–1.06 |
–0.66 |
–0.68 |
| 2003 |
28.28 |
28.52 |
28.84 |
26.70 |
26.80 |
27.08 |
| 2004 |
19.72 |
19.79 |
19.86 |
17.76 |
17.79 |
17.73 |
| 2005 |
12.93 |
12.93 |
13.16 |
12.13 |
12.13 |
12.30 |
| 2006 |
16.37 |
16.39 |
16.36 |
15.40 |
15.35 |
15.38 |
| 2007 |
13.33 |
13.36 |
13.79 |
10.80 |
10.80 |
11.25 |
| 2008 |
–29.84 |
–29.04 |
–28.22 |
–25.70 |
–24.87 |
–24.62 |
| 2009 |
32.13 |
32.43 |
32.46 |
25.24 |
25.50 |
24.99 |
| 3-Year Annualized % Return |
| |
1.66 |
2.13 |
2.66 |
1.02 |
1.47 |
1.58 |
| 5-Year Annualized % Return |
| |
6.66 |
6.96 |
7.33 |
5.93 |
6.21 |
6.31 |
| 10-Year Annualized % Return |
| |
9.51 |
9.76 |
9.99 |
7.52 |
7.73 |
7.81 |
*Performance figures reported on the 7Twelve web site and in the 50+ page 7Twelve Research Report.
**Performance figures reported in my forthcoming book (7Twelve: A Diversified Investment Portfolio with a Plan) and in the soon-to-be-released 7Twelve Analysis software (Excel template).
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