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Portfolio rebalancing

Investments can instruct you which orders you have to submit to make your portfolio in order with your asset allocation.

All commands below operate on local database to store intermediate results. Local database is required because during rebalancing you submit buy/sell orders to your broker that modify your portfolio (free assets, open positions) and this information have to be saved somewhere until at least tomorrow when you'll be able to download a new broker statement which will include the changes.

First, sync command should be executed to read your broker statements and store your current positions to the local database. But you are free to not use it - for example if you want to rebalance portfolio of an unsupported broker.

Here is how we can emulate sync command execution and populate the database manually (but in this case you should ensure that statements configuration option is not specified, because in other case the program will try to read the broker statements to get some information about the specified instruments):

$ investments buy ib 100 VTI 4000
$ investments buy ib 30 VXUS 4000
$ investments buy ib 40 BND 4000
$ investments buy ib 60 BNDX 4000

With these commands executed and provided example config we'll get the following results for show and rebalance commands:

investments show

investments rebalance

Rebalancing actions in this case are assumed to be the following:

  1. View the instructions: investments rebalance
  2. Buy 50 VXUS using broker's terminal, got $current_assets left on your account
  3. Commit the results: investments buy ib 50 VXUS $current_assets
  4. View the instructions: investments rebalance
  5. Buy 12 BNDX using broker's terminal, got $current_assets left on your account
  6. Commit the results: investments buy ib 12 BNDX $current_assets
  7. View the instructions: investments rebalance
  8. Buy 9 BND using broker's terminal, got $current_assets left on your account
  9. Commit the results: investments buy ib 9 BND $current_assets
  10. View the result: investments show

This iterative trading is not required - you can look at the results of investments rebalance and submit all orders at once, but it leaves a chance to spend more than you supposed to in case of highly volatile market. In practice, the simplest strategy here in case of relatively small price of all stocks - submit all orders except the last one, commit the current result, execute investments rebalance and submit the rest.

You can also tune min_cash_assets configuration option - it configures the amount of cash that must remain on the account after rebalancing. It can serve both a protection against volatility and to instruct rebalancing logic to proportionally sell the assets to acquire the specified amount.