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I'm admittedly not up on rebalancing policies. With a fund of highly volatile assets, would rebalancing more frequently be necessary? I'm not thinking daily, bu

I'm admittedly not up on rebalancing policies. With a fund of highly volatile assets, would rebalancing more frequently be necessary? I'm not thinking daily, but perhaps every month or so?

solarkraft 9y ago
I believe so. The worth of your portfolio is the worth of the assets. Bitcoin dropped a ton in even a month. There are still changes of a few percent possible in less than a day, so yearly balancing sounds insanely dumb to me.
- ericd 9y ago
  Index funds are usually market cap weighted, so day to day changes in value don't require rebalancing, since if a security suddenly doubles, its market cap does too, and it's therefore still held in the correct proportion to the other securities in the index.
slg 9y ago
Yes, at the most general level highly volatile assets should be rebalanced more frequently. However, that isn't going to be a universal rule. It will depend on what is causing the volatility and whether that is more a product of the market or something specific related to the assets. Rebalancing too frequently is also a very real possibility so more is not always better. Another consideration specific to cryptocurrencies like Bitcoin is the relatively high transaction fee. You don't want to see your investments be whittled away by frequent transaction fees doing unnecessary rebalances. I haven't spent enough time researching cryptocurrencies to know how all these considerations shake out when it comes to this specific index fund, but as a pure gut instinct the annual rebalancing was less frequent than I would have expected from this type of fund.
- proofofmoon 9y ago
  Rebalancing cryptoassets on the same exchange (without withdrawing to a wallet [1]) doesn't require on-chain transactions. The fee would be the order fill fee, which for GDAX is 0-0.25%, much less than 2% of the account balance. ([1] For the not-your-keys-not-your-coins crowd: if you don't trust Coinbase with the coins, you can't trust it with the fund either.)
the_gastropod 9y ago
The point of market cap weighting is that rebalancing is mostly unnecessary. The only events that require a rebalance is when a coin is added or removed from the index.
nwellnhof 9y ago
A fund weighted by market cap doesn't have to be rebalanced. With crypto assets, you only have to adjust for newly mined coins. The Bitcoin supply, for example, is currently growing at about 4% per year. But if the other currencies in the Coinbase Index are mined at a similar rate, yearly rebalancing should be accurate enough.
- deleted 9y ago
  [deleted]

I'm admittedly not up on rebalancing policies. With a fund of highly volatile assets, would rebalancing more frequently be necessary? I'm not thinking daily, but perhaps every month or so?

solarkraft 9y ago

I believe so. The worth of your portfolio is the worth of the assets. Bitcoin dropped a ton in even a month. There are still changes of a few percent possible in less than a day, so yearly balancing sounds insanely dumb to me.

ericd 9y ago
Index funds are usually market cap weighted, so day to day changes in value don't require rebalancing, since if a security suddenly doubles, its market cap does too, and it's therefore still held in the correct proportion to the other securities in the index.

slg 9y ago

Yes, at the most general level highly volatile assets should be rebalanced more frequently. However, that isn't going to be a universal rule. It will depend on what is causing the volatility and whether that is more a product of the market or something specific related to the assets. Rebalancing too frequently is also a very real possibility so more is not always better. Another consideration specific to cryptocurrencies like Bitcoin is the relatively high transaction fee. You don't want to see your investments be whittled away by frequent transaction fees doing unnecessary rebalances. I haven't spent enough time researching cryptocurrencies to know how all these considerations shake out when it comes to this specific index fund, but as a pure gut instinct the annual rebalancing was less frequent than I would have expected from this type of fund.

proofofmoon 9y ago
Rebalancing cryptoassets on the same exchange (without withdrawing to a wallet [1]) doesn't require on-chain transactions. The fee would be the order fill fee, which for GDAX is 0-0.25%, much less than 2% of the account balance. ([1] For the not-your-keys-not-your-coins crowd: if you don't trust Coinbase with the coins, you can't trust it with the fund either.)

the_gastropod 9y ago

The point of market cap weighting is that rebalancing is mostly unnecessary. The only events that require a rebalance is when a coin is added or removed from the index.

nwellnhof 9y ago

A fund weighted by market cap doesn't have to be rebalanced. With crypto assets, you only have to adjust for newly mined coins. The Bitcoin supply, for example, is currently growing at about 4% per year. But if the other currencies in the Coinbase Index are mined at a similar rate, yearly rebalancing should be accurate enough.

deleted 9y ago
[deleted]