Comprehensive Rebalancing Simulator Version 3

8/11/2019 Comprehensive Rebalancing Simulator Version 3

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Read me frst1. Equity returns assumed are historical sensex returns computed for each nancial ye2. Debt returns are historcial FD returns from RBI ebsite!. "he last fe debt returns #in red$ ha%e been added by hand as I could not &et hold o'. Rebalancin& a porfolio may in%ol%e transaction costs especially in (I) mode if the ho*. Debt instruments are taxable+ so the nal corpus ill be lo er in both cases and thi

,. "he rebalancin& sho n here is done durin& the &ro th phase of the portfolio hen t-. lose to &oal #2/! year$ the equity component ill be &radually or abruptly decrease0. "he abo%e step does not constitute rebalancin& is the sense that it is usually used

. "he tool is only an indicator you ould need to ma e a suitable choice dependin& o+ If the direct tax code comes to e3ect lon& term equity in%estments ill also become t


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r

f actual dataldin& period of equity is less than an year

tax may impact the bene t of rebalancin&

e &oal if far a ayd and pushed to debt

your personal situation. axable


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This is an illustration o port olio rebalancing as ound athttp455 .6a&oin%estor.com5277057-5portfolio/rebalancin&/today/i/am/&oin&.html8n in%estment of 1 la hs is considered. 9f this !7: is in%ested in equity and -7: inNo Rebalancing. No uther changes are then made. The money is allowed to

Year Sensex investment Total E uity !" investmentreturn return

1 !7: !7777 ! 777 .7: -77772 /!*: ! 777 2*!*7 .7: -,!77! '7: 2*!*7 !*' 7 .7: 0!1,-' ,7: !*' 7 *,-0' .7: 7,*2* /!7: *,-0' ! -'0.0 .7: 0011

Rebalancing with #$% e uity and &$% debtEach year #$% o total corpus earned is invested in e uity and &$% in debt

Year Sensex 'nvestment Total E uity !" 'nvestmentreturn return

1 !7: !7777 ! 777 .7: -7777

2 /!*: !'* 7 22'0!.* .7: 07-17! '7: !!1!- ',! 2.170 .7: --!27' ,7: ! 271 ,2-22.1!771, .7: 1'-7* /!7: '0-2- !'17 .7-0!2 .7: 11!, -

'n this case the rebalanced por olio has done better.Is rebalancin& crucial; It can be most times. "he most important thin& is hat is youris lo er then the corpus achie%ed ith no rebalancin& than your &oal can be achie%e


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ebt instruments 8sset 8llocation grow. Before in%estment 8fter In%e

Total !" Total (orpus E uity "ebt E uity"ebt E uity

-,!77 11*!77 !': ,,: !7: -7: !':0!1,- 170*1- 2!: --: !': ,,: 2!:7,*2 12,1'2 20: -2: 2!: --: 20:0011 1*** * !,: ,': 20: -2: !,:

17--7' )*&*+, 2-: -!: !,: ,': 2-:8sset 8llocation

Before in%estment 8fter In%eirrespective o returns earned the previous y E uity"ebt E uityTotal Total (orpus E uity "ebt

-,!77 11*!77 !': ,,: !7: -7: !':

0- -' 117'*- 27: 07: !7: -7: 27:0'2- 1!7,-1 !,: ,': !7: -7: !,:

-72 1,2'2' ! : ,1: !7: -7: ! :12! !7 )+-$# 22: -0: !7: -7: 22:

expected corpus for a &oal. If this amount.

d%anta&eous more often to rebalancecan be ta en as si&ni cant.


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tment."ebt

,,:--:-2:,':-!:

tment."ebt

,,:

07:,':,1:-0:


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Enter data only in green cellsEnter no of years #max !2$ ,+

hoose a startin& year bet een ) -$ and ) -&(tartin& year ) -&

=umpsum in%estment )$$

: in equities &$% : in FDs #$%

"otal must be 177:

Equity corpus Debt orpus "otal corpus : Equity :Debtno rebalancin& 2>!0- 2'- ,/0#+ 1: :annual rebalancin& 2>10, 1>1,2 #/#*- ,*: !*:

"he : equity and debt sho n here represents the nal asset allocation% di1erence bet the two corpuses ,&%

2ve means rebalanced port olio is higherlic on the macro to nd out the : di3erence

bet een the t o corpuses for all possiblein%estment durations bet een

1 07 and 1 0-3verage % di1erence bet the two corpuses )*.&%

Year % di1erence (34R5rebal6 (34R5none61 07 17.': 1,.17: 1*.,':1 01 *.*: 1,. : 1,.-':

1 02 -.7: 1,.-7: 1,.! :1 0! 1.!: 1-.!-: 1-.!1:1 0' 21.0: 1*.' : 1'.*0:1 0* 1-.0: 1,.!1: 1*.**:1 0, 2,.,: 1*.72: 1!. ':1 0- 2-.1: 1*.70: 1!. 0:


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3nnual (34R Year o YearNo 7ith return

RebalancingRebalancing1 07 71 01 7

1 02 71 0! 71 0' 71 0* 71 0, 7

/12.-: /12.-: 1 0- 18?R 1*.,: 1-.*: 1 00 21!. 0: 1!.': 1'.-: 1 0 !1*.70: 1 .!: 27.7: 1 7 '

''.-: '!.2: 1 1 *2'.1: 2-.!: 1 2 ,

20.': !7.2: 1 ! -22.,: 2'. : 1 ' 027.*: 22.,: 1 *10.': 27.,: 1 , 1710.1: 27.7: 1 - 111,.!: 10.2: 1 0 121-.!: 10.0: 1 1!1!.0: 1*.0: 2777 1'12.-: 1'.-: 2771 1*11.2: 1!.2: 2772 1,

1!.0: 1*.*: 277! 1-1!. : 1*.!: 277' 101,.1: 1-.1: 277* 11,.7: 1,. : 277, 271,.1: 1,.0: 277- 211!.2: 1'.*: 2770 221*.2: 1,.2: 277 2!1*.7: 1,.7: 2717 2'1'.7: 1*.1: 2711 2*

@ote !*: retur&enerated in th


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No RebalancingSensex investment Total (orpus !" 8onthly Total 3sset 3llocationreturn return 3 ter 'nvestment

E uity "ebt!*: 7 7 -.*: 7 7 7: 7:2,: 7 7 0.7: 7 7 7: 7:

/!: 7 7 0.7: 7 7 7: 7:1,: 7 7 0.7: 7 7 7: 7:'': 7 7 0.7: 7 7 7: 7:,2: 7 7 0.*: 7 7 7: 7:/11: 7 7 0.*: 7 7 7: 7:/22: -7 *'.,! ,,,110 .7: !7 !! ,!: !-:- : 7 -.0-,77 7 2 .7: 7 !, -!: 2-:

: 7 17-.12-!210 .7: 7 ! -!: 2-:*7: 7 1,7.1 ,*2- ' .7: 7 '2 - : 21:

2,-: 7 *0-.-22! 27' 12.7: 7 '- !: -:/'-: 7 !12.- 1-*'0' 11.7: 7 *! 0,: 1':

,,: 7 *10.!1 72 - 17.7: 7 *0 7: 17:/1': 7 ''-.2,-72-2 11.7: 7 ,' 0-: 1!:

!: 7 ',1.-*---002 12.7: 7 -2 0-: 1!:7: 7 ',7. -!2!'*0 12.7: 7 01 0*: 1*:

1,: 7 *!!. 221!!' 11.7: 7 7 0,: 1':/': 7 *12. ,*-' ,- 17.*: 7 0': 1,:!': 7 ,0*. ,* 0'0 0.*: 7 17- 0,: 1':/20: 7 ' '.!, 0*,*- 0.*: 7 11, 01: 1 :/': 7 '-*.0' '77'2 -.*: 7 12* - : 21:

/12: 7 '10.1*,* *!' '.!: 7 1!7 -,: 2':

0!: 7 -,,.- * 0-1* '.7: 7 1!, 0*: 1*:1,: 7 0 7.*'2-*'1! *.!: 7 1'! 0,: 1':-': 7 1*'-.1'!1 ! ,.7: 7 1*1 1: :1,: 7 1- 2. ''1 ,! ,.!: 7 1,1 2: 0:27: 7 21'*.-** !- -.7: 7 1-2 !: -:/!0: 7 1!!1.* 2,!! 0.7: 7 10, 00: 12:01: 7 2'7!. , -',0 .7: 7 27! 2: 0:11: 7 2,,-.7!0 *2 17.7: 7 22! 2: 0:/17: 7 2!0-.12,-!'1 11.7: 7 2'- 1: :

s listed a&ainst 1 07 actually is the returnnancial year 1 07/1 01


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3nnual Rebalancing Year o Year Sensex 'nvestment Total !" 8onthly

return return return

1 07 7 !*: 7 7 -.*: 71 01 7 2,: 7 7 0.7: 7

1 02 7 /!: 7 7 0.7: 71 0! 7 1,: 7 7 0.7: 71 0' 7 '': 7 7 0.7: 71 0* 7 ,2: 7 7 0.*: 71 0, 7 /11: 7 7 0.*: 71 0- 1 /22: -7 *'.,! ,,, .7: !71 00 2 - : 7 17 .*1,7* .7: 71 0 ! : 7 17*.-0 7! .7: 71 7 ' *7: 7 1*-. 2' .7: 71 1 * 2,-: 7 *!2.*10 1 12.7: 71 2 , /'-: 7 22'.!''!, 11.7: 7

1 ! - ,,: 7 ' 2.0!!1, 17.7: 71 ' 0 /1': 7 !02.!0'2' 11.7: 71 * !: 7 '20.,0!-0 12.7: 71 , 17 7: 7 '!0.0' !* 12.7: 71 - 11 1,: 7 *2,.00,*2 11.7: 71 0 12 /': 7 ' .0071 17.*: 71 1! !': 7 , 0.*-,0! 0.*: 72777 1' /20: 7 '-'. ,-22 0.*: 72771 1* /': 7 *2,.*7!02 -.*: 72772 1, /12: 7 '-0.00-7, '.!: 7

277! 1- 0!: 7 2-.2' - '.7: 7277' 10 1,: 7 !-.7'000 *.!: 7277* 1 -': 7 1*02.1*10 ,.7: 7277, 27 1,: 7 1,1 .7-1 ,.!: 7277- 21 27: 7 100 .!2,' -.7: 72770 22 /!0: 7 11!*.27*1 0.7: 7277 2! 01: 7 2*7'.*0'- .7: 72717 2' 11: 7 2''0.!,,- 17.7: 72711 2* /17: 7 210*.01, 11.7: 7


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Total 3sset 3llocation3 ter investmentE uity "ebt

7 7: 7:7 7: 7:

7 7: 7:7 7: 7:7 7: 7:7 7: 7:7 7: 7:

!! ,!: !-:2 - : 21:'* -7: !7:' -,: 2':-7 00: 12:

271 *!: '-:

1'7 -0: 22:211 ,': !,:1 ,0: !2:211 ,0: !2:21, -1: 2 :2', ,-: !!:2'! -': 2,:!7, ,1: ! :2*2 ,0: !2:2'! ,,: !':

22* 07: 27:!,' -2: 20:'1' - : 21:,!, -2: 20:-2' -2: 20:0'- *-: '!:,'0 - : 21:

17'7 -7: !7:11,2 ,*: !*:


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Enter data only in green cellsEnter no of years #max !2$ ))

hoose a startin& year bet een ) -$ and(tartin& year ,$$$

monthly contribution in 1st year )$$$$

: increase or decrease each year

: in equities 0$% : in FDs *$%

"otal must be 177:

Equity corpus Debt orpus "otal corpus : Equityno rebalancin& 2>*'1> 0' 022>',2 #/#0*/**0 -,:annual rebalancin& 2>70!> 2! 1>!-->'-2 #/*0)/# + ,7:

"he : equity and debt sho n here represents the nal asset allocation% di1erence bet the two corpuses is ,. % i started at ,$$$

2ve means rebalanced port olio is higherlic on the macro to nd out the : di3erence

bet een the t o corpuses for all possiblein%estment durations bet een

1 07 and 27713verage % di1erence bet the two corpuses &.0%

Start Year % di1erence (34R5rebal6 (34R5none61 07 /1,.*: 2 .!2: !1.0-:1 01 12.2: 2!.70: 21.'-:

1 02 '.2: 2*. !: 2*.!*:1 0! 12.2: 2!.1*: 21.*2:1 0' 1*.': 21.',: 1 .'*:1 0* 10.': 1 .!1: 1,. !:1 0, 1,.,: 10.,2: 1,.'*:1 0- 1,.!: 1,.02: 1'.,0:1 00 12.7: 1-.!7: 1*., :1 0 1*.': 11.,!: .*-:1 7 17.-: 0. ': -.',:1 1 !.!: '. -: '.*7:1 2 ,.': 0.*1: -.,7:

1 ! *.0: .!': 0.*!:1 ' !.-: 1!.'': 12. !:1 * 1.*: 1'.77: 1!.-0:1 , /1.7: 1'.,,: 1'.07:1 - 0. : 17.10: 0. *:1 0 *: 1'.00: 1'.27:1 ': 1'. ': 1'.'!:2777 ,: 1!.1': 12.2-:


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11 1*.72: 1*.',:8?R at the end of each in%estment year

,$$) 8?R at the Aithout Aithend of year rebalancin& rebalancin&

1 /1!.!,: /1!.!,:2 /!.-7: /'.7':

! /'.2*: /'.02:' 1!.70: 1'.2!:* 12.0-: 1!.'-:, 21.*-: 21.7-:- 1 .0!: 1 .7 :0 1 .2!: 10.2*:

:Debt !inal (34R .*': 17.-':2': )+.$)% 17 1*.-1: 1,.2*:'7: )+.*+% )) )+.$,% )+.*0%

Final 8?R is the last entry

Relation between (34R8?R at the end of the second in%estment yea8?R at the end of the rst in%estment year is

annual return after the rst year. sin& both threturn at the end of the second year is calculat

"hat is returns at the end of year one is '7.-*year t o is /21. :> the 8?R at the end of y

The ormula is9 5)2*$.&+


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E3ecti%e annual returns 8nnual &ain Year o Year SensexAithout Aith or loss ith return return

rebalancin& rebalancin& rebalancin&/1!.!,: /1!.!,: 7.77: 1 07 7 !*:11.1': 17.-,: /7.! : 1 01 7 2,:

/7.*-: /7.02: /7.2*: 1 02 7 /!:10.17: 27.72: 1. 2: 1 0! 7 1,:/7.10: /7.,,: /7.'0: 1 0' 7 '':-.-1: ,.-7: /1.71: 1 0* 7 ,2:/1.'!: /1.,!: /7.27: 1 0, 7 /11:/7.' : /7.-1: /7.22: 1 0- 7 /22:/0.1!: /,.!*: 1.-0: 1 00 7 - :*.,!: '. -: /7.,,: 1 0 7 :/7.,7: /7.,-: /7.70: 1 7 7 *7:

1 1 7 2,-:1 2 7 /'-:

1 ! 7 ,,:1 ' 7 /1':1 * 7 !:1 , 7 7:1 - 7 1,:1 0 7 /':1 7 !':2777 1 /20:2771 2 /':2772 ! /12:

277! ' 0!:277' * 1,:277* , -':277, - 1,:277- 0 27:2770 /!0:277 17 01:2717 11 11:2711 7 /17:

@ote !*: returns listed a&ai&enerated in the nancial y

and annual returns9 r is .0:

'7.-*:. "his is also theese the e3ecti%e annualed to be /21. :

and at the end ofar t o is .0:6:5);,). %6;)< .-%


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No Rebalancing3nnual invest. !rom Total E uity !" 3nnual invest. !rom

investment =revious (orpus return investment =reviousyear year

7 7.77 7.77 -.*: 7 7.77 7.77 7.77 0.7: 7 7.7

7 7.77 7.77 0.7: 7 7.77 7.77 7.77 0.7: 7 7.77 7.77 7.77 0.7: 7 7.77 7.77 7.77 0.*: 7 7.77 7.77 7.77 0.*: 7 7.77 7.77 7.77 .7: 7 7.77 7.77 7.77 .7: 7 7.77 7.77 7.77 .7: 7 7.77 7.77 7.77 .7: 7 7.77 7.77 7.77 12.7: 7 7.77 7.77 7.77 11.7: 7 7.7

7 7.77 7.77 17.7: 7 7.77 7.77 7.77 11.7: 7 7.77 7.77 7.77 12.7: 7 7.77 7.77 7.77 12.7: 7 7.77 7.77 7.77 11.7: 7 7.77 7.77 7.77 17.*: 7 7.77 7.77 7.77 0.*: 7 7.7

-2777 7.77 *100 .- 0.*: '0777 7.7-2777 *100 .- 11 2'0.*' -.*: '0777 *2707.7-2777 11 2'0.*' 1,07,1.2! '.!: '0777 17-*0,.7

-2777 1,07,1.2! ''721!.7* '.7: '0777 1,21 0.'-2777 ''721!.7* * '0-'.01 *.!: '0777 210,7,.!-2777 * '0-'.01 11*0*,'.7, ,.7: '0777 207,7!.2-2777 11*0*,'.7, 1'2,7,0.0! ,.!: '0777 !'0!1 .'-2777 1'2,7,0.0! 1- 20**.,2 -.7: '0777 '2170 .!-2777 1- 20**.,2 11*-2- . - 0.7: '0777 *71 2*.,-2777 11*-2- . - 221 2*7.1* .7: '0777 * ! 1 .,-2777 221 2*7.1* 2*'1 0'.!2 17.7: '0777 , , 2.'

7 7.77 7.77 11.7: 7 7.7 inst 1 07 actually is the return

ar 1 07/1 01


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Total "ebt 3sset 3llocation Year o Year(orpus E uity "ebt E uity "ebt

=rior investment 3 ter investment return7 7: 7: 7: 7: 1 07 77 7: 7: 7: 7: 1 01 7

7 7: 7: 7: 7: 1 02 77 7: 7: 7: 7: 1 0! 77 7: 7: 7: 7: 1 0' 77 7: 7: 7: 7: 1 0* 77 7: 7: 7: 7: 1 0, 77 7: 7: 7: 7: 1 0- 77 7: 7: 7: 7: 1 00 77 7: 7: 7: 7: 1 0 77 7: 7: 7: 7: 1 7 77 7: 7: 7: 7: 1 1 77 7: 7: 7: 7: 1 2 7

7 7: 7: 7: 7: 1 ! 77 7: 7: 7: 7: 1 ' 77 7: 7: 7: 7: 1 * 77 7: 7: 7: 7: 1 , 77 7: 7: 7: 7: 1 - 77 7: 7: 7: 7: 1 0 77 7: 7: 7: 7: 1 7

*2707 ,7: '7: *7: *7: 2777 117-*0, **: '*: *!: '-: 2771 21,21 0 **: '*: *1: ' : 2772 !

210,7, *!: '-: ,-: !!: 277! '207,7! ,,: !': ,0: !2: 277' *!'0!1 ,-: !!: --: 2!: 277* ,'2170 -,: 2': --: 2!: 277, -*71 2, -,: 2': -0: 22: 277- 0* ! 27 --: 2!: ,,: !': 2770, , 2 ,,: !': -,: 2': 277 17022',2 -*: 2*: -,: 2': 2717 11

7 7: 7: 7: 7: 2711 7


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3nnual RebalancingSensex 3nnual invest. !rom Total E uity !" 3nnualreturn 'nvestment =revious (orpus return investment

year!*: 7 7 7 -.*: 72,: 7 7 7 0.7: 7

/!: 7 7 7 0.7: 71,: 7 7 7 0.7: 7'': 7 7 7 0.7: 7,2: 7 7 7 0.*: 7/11: 7 7 7 0.*: 7/22: 7 7 7 .7: 7- : 7 7 7 .7: 7

: 7 7 7 .7: 7*7: 7 7 7 .7: 7

2,-: 7 7 7 12.7: 7/'-: 7 7 7 11.7: 7

,,: 7 7 7 17.7: 7/1': 7 7 7 11.7: 7

!: 7 7 7 12.7: 77: 7 7 7 12.7: 7

1,: 7 7 7 11.7: 7/': 7 7 7 17.*: 7!': 7 7 7 0.*: 7/20: -2777 7 *100 .-0021' 0.*: '0777/': -2777 ,2!01.0-2 2 12 !'-.**- ! -.*: '0777

/12: -2777 1!*! 2.-'712 1022'0.70*2- '.!: '0777

0!: -2777 1 *0!1.,2!- ' 11!-.7 220 '.7: '07771,: -2777 '7,177.2170- ***2*,.- 71- *.!: '0777-': -2777 *!''!'.2,200 17*!*,7.', 1 ,.7: '07771,: -2777 00 2,'.'70 ' 111! 0'.'! - ,.!: '077727: -2777 17-, 20.7!-, 1!-*711.,*72 -.7: '0777/!0: -2777 1!1,-'0.1 72 0,1027.!1 ! 0.7: '077701: -2777 111-7!1.'7 0 21',*00.'7! .7: '077711: -2777 107,!-7.-!- 270! 2!.7!2 17.7: '0777/17: 7 7 7 11.7: 7


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invest. !rom Total "ebt 3sset 3llocation=revious (orpus E uity "ebt E uity "ebt

year =rior investment 3 ter investment7 7 7: 7: 7: 7:7 7 7: 7: 7: 7:

7 7 7: 7: 7: 7:7 7 7: 7: 7: 7:7 7 7: 7: 7: 7:7 7 7: 7: 7: 7:7 7 7: 7: 7: 7:7 7 7: 7: 7: 7:7 7 7: 7: 7: 7:7 7 7: 7: 7: 7:7 7 7: 7: 7: 7:7 7 7: 7: 7: 7:7 7 7: 7: 7: 7:

7 7 7: 7: 7: 7:7 7 7: 7: 7: 7:7 7 7: 7: 7: 7:7 7 7: 7: 7: 7:7 7 7: 7: 7: 7:7 7 7: 7: 7: 7:7 7 7: 7: 7: 7:7 *2707 ,7: '7: *7: *7:

'1*0-. 1*20, ,!7- ,7: '7: *-: '!:72,1.02,-'' 1''1!0 ,7: '7: *,: '':

1!7**'.'1*0, 10*, - ,7: '7: -!: 2-:2-7-!!.'-! 1 !!*',- ,7: '7: ,2: !0:!*,20 .*70*0 '20*'- ,7: '7: -1: 2 :* 20'2. ! ! ,070 , ,7: '7: ,2: !0:

-1- *2.72*7 01 *, ,7: '7: ,!: !-:0--0!2.12,0 0 ,7: '7: ',: *':

-'',0-.,7,*! 0,'72 ,7: '7: -1: 2 :127'2'-.1*0 1!--'-2 ,7: '7: ,7: '7:

7 7 7: 7: 7: 7:


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Documents

Comprehensive Rebalancing Simulator Version 3