Rebalancing 3a - final conclusion

I wondered what the final conclusion is on rebalancing 3a: Shall I deactivate it or not?

In this thread, high spreads were mentioned, trading in CHF instead of USD etc., all resulting in higher costs. Pooling & netting does not seem to help.

However, I have come across studies in favor of rebalancing. What’s your take?

Rebalancing is not about returns, it’s about risks.

If you stop rebalancing, over decades, the returns will keep getting higher as stocks become the majority. But this comes at the costs of more fluctuations and the risk of panic sells in a drawdown.

If you determined that your ideal allocation to stocks is not 100%, then rebalancing is useful. Fees can be lower by choosing a provider with low fees.


So I take it you wouldn’t recommend rebalancing in a 100% global stock portfolio (e.g. 80% MSCI World, 10% Emerging Markets and 10% Small Caps)?

I would still rebalance if it were me. Depending on the provider rebalancing may not happen so often and the spreads are only paid on the marginal part that gets rebalanced.

It’s also risk driven because growth is higher in emerging markets and risks are higher for small stocks. So if you let them drift apart it will increase your portfolio risk and away of your initial targets.

Note I’m not a financial advisor. That’s just the way I do it on my own savings.

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Why rebalance a 100% stock portfolio? I assume that your asset allocation (90% World 10% EM) is replicating VT. If you turn on rebalancing you’ll slowly drift away from your desired allocation. Let’s assume EM has a great decade and outperforms the rest, VT is 80% World and 20% EM in 10 years. With turned on rebalancing you’ll still be at 90/10.


That’s a good way of looking at things too.

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But there are still new investments from cashflow. I guess you’ll have to adjust from time to time anyway.

Thanks, this is very helpful. It makes perfect sense to me that rebalancing counters the idea of a market-weighted global stock portfolio.

I also like the fact of hereby avoiding any hidden costs involved with rebalancing. It’s always felt a little murky to me (spreads, fx costs etc)

Btw, keep in mind that Vanguard is using FTSE indices and Swiss 3rd pillar solutions are using MSCI indices. South Korea is a developed market in FTSE and an emerging market in MSCI. So currently EM makes up 9.9% of the world in FTSE and 11.3% in MSCI.


This I don’t understand. Do you mean the CHF >7500 per year? Which would not be allocated to my current positions automatically?

Excellent, thanks, I’ll try to replicate as precisely as possible. I’m currently going through a very painful process of rebalancing all my assets due to my former emerging markets overweight of 20% :see_no_evil: I don’t even want to know what all these transactions will cost me.

Just buy more non-EM outside of 3rd pillar, and look at all your assets as a whole.
Not really costly.


Good point, but in my situation not possible I fear. I’m switching from a 80% MSCI World / 20% EM portfolio (in broker and 3a accounts) to investing in VT. So I need to reduce EM allocations to 10%, because investing in VT from now on won’t help bringing EM allocation down. And buying more MSCI World would be super costly because this position lies with an exorbitantly expensive broker (I use a different one for VT)…

Of course, buying more MSCI World with my cheap broker would help, but I’d like to keep my VT account and my MSCI World/EM account separate, just for simplicity

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Anyway I don’t think regarding all brokers, 3a accounts, etc. as “one portfolio” where you have in 1 account a bit more EM, in the other a bit more of that etc. is a good idea. If for whatever reason you lose one of them, your portfolio ends up in being heavily imbalanced. That’s why I would rather apply your SAA on all brokers / accounts equally.

How would you lose one of them?

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Maybe WW3, both data centres of the bank gets nuked, incompetency of the people working for the bank, rogue employee, hacking, blackmailing, if you have a foreign broker such as IBKR / Degiro etc. there may be legal issues that gets the foreign government to confiscate your assets…, tensions between states, options I didn’t think of now, etc.

Some people here have several brokers instead of just one. If that option would be completely out of scope / possibility, then people wouldn’t need several brokers, no?

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Yes, that’s my reason for using two brokers. Just never laying all eggs in to one basket :slight_smile:

The only free lunch we got is diversification. I’m diversifying like crazy in VT with its 9000+ stocks, so why would I concentrate on one single broker? Any company or even country can go broke or rogue. With regards to IB: It’s so huge it’s become scary to me. And even if there is insurance etc.: Good luck with international lawsuits!

The way laws are in the US and EU prevent such stuff. Stocks of customers are not part of the balance sheet of any broker - if that would be the case, IB would probably be one of the biggest companies in the NASDAQ.

I don’t see a point in diversifying brokers. With that argumentation you’d also need to buy some MSCI ACWI, because no one knows if Vanguard will go bankrupt or commit fraud

Yes, and insurances can also bankrupt. See AIG in 2008 - if there will be no government bailout, then you won’t see a penny. And I don’t think the Swiss government will consider a bailout of foreign brokers / banks and it is questionable whether the US / UK government would consider a foreign broker/bank/insurance bailout when most assets are held by foreign investors. All tricky things here.

Yes, nobody said that. But that doesn’t prevent any of those things mentioned above from happening. If your assets get stolen, they are gone. Same thing with a bank vault, banks usually say that insuring the stuff in there is the customers problem and in case of damage of whatever reason be it water, bombs, theft whatever, it’s your problem.

I think that risk is much smaller because Vanguard is not a custodian. But even then, I try not to hold everything with Vanguard ETFs and also diversify across ETF providers.

That’s why I think it’s better to apply your SAA on all banks, brokers, 3a, etc. equally and rebalance regularly. At least it’s what I’m doing :slight_smile:

Congratz @Patron for derailing another thread.

Why derailing? The question is whether to rebalance 3a or not. Then it was argued that it should be disabled and that 3a should be seen as one portfolio with other assets, and I brought arguments against it. Then YOU asked a question and I answered it. So if someone started going to ask off-topic questions then it’s you. I mean it’s a bit weird to ask an off-topic question and then complain that someone answered it :slight_smile: Don’t get me wrong I find your question legitimate, I mean it should be possible to ask why someone gets to a certain conclusion, it’s just funny that after that you start to complain about it. Also this “Congratz” post is pretty much a derailment from your side.

Whatever. My take is every broker / 3a account should stand independent and apply the SAA and one should rebalance regularly including 3a.

It’s perfectly on topic. If you agree with it or not, is another question.

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