Portfolio Rebalance - What It Is and How to Perform It Easily with Interactive Brokers

by Francesco Placci

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Asset allocation models are very useful for increasing portfolio diversification and reducing the risk of overexposure.

The use of these models implies periodic rebalancing operations that allow to maintain the balance between the different assets in the portfolio. 

In today's video, we’re going to talk about a very useful instrument provided by the Interactive Brokers platform. It's called "Rebalance Portfolio" and it allows to rebalance the portfolio in an easy and fast way.

By watching the video you’ll learn:

- What the Interactive Brokers instrument called "Rebalance Portfolio" is and how it works

- Why the "Rebalance Portfolio" can help you simplify your asset allocation operations

- A real live example of a recent rebalance on our monthly asset allocation model

Enjoy the video! :-)

Transcription

Hello friends and welcome back!

One of the coaches of Unger Academy here and we’re going to be talking about a very useful instrument of the Interactive Brokers platform: the Rebalance Portfolio. I'd like to show it to you with a real example of how to use it.

Okay, so as anticipated, today we’re going to talk about this really very useful instrument, the Rebalance Portfolio.

So what does this instrument do? Well, it enables, in a few simple clicks, to rebalance a portfolio of investments, stocks, commodities, bonds, in other words the standard asset allocation, in a very simple and fast way.

For example, we use it for the trading signals of our monthly or weekly rotational asset allocation portfolios that you can find on the Unger Investing website, which are reserved for members of our club.

And precisely for this reason I want to show you a real case, a live rebalancing that we conducted recently on the basis of these signals.

So we're here to rebalance our monthly asset allocation model. The model is based on these ETFs, or their European counterparts, which always remain fixed. What varies is the relative percentage weight.

So, as usual, let’s go to the platform. Let's open the Rebalance Portfolio tool. 

And as you can see, we currently have different weights due to market fluctuations. So, let's enter the new percentage weights.

3.81 in commodities.

Then we have the Nasdaq: 20.14.

The S&P 500: 15.25.

We have long-term bonds: 49.36.

Then we have medium-term bonds: 7.63.

And lastly Gold: 3.81. Ok.

So, these are the new percentage weights. We'll check them again just to make sure. 3.81 and 3.81 for commodities and Gold. 20.14 for the Nasdaq. 15.25 S&P. 49.36 TLT, the long-term bonds, and 7.63 medium-term bonds.

OK, now we can go and click on "Create Rebalance Orders".

Here they are. As you can see, we have five orders to execute, this is a real account. So, at this point, I'll use limit orders and as a price, I'm going to go to the mid hoping that it will be executed at the mid, okay?

At this point, we can click on “Submit all orders”. The market is obviously open.

Something has already been executed. I’d say almost everything, only two underlying assets are missing, the Nasdaq and the medium-term bonds.

At this point, we can reposition ourselves on the mid once again and try to be executed.

There isn't as much liquidity on the European markets as there is on the Nasdaq, so it may be more difficult.

Here we go. The last mid update... also the last one is done, ok.

So, we can close and reopen. And there you have it, our weights should be very similar to what we saw in the initial model proposed in the Learn platform.

Obviously, the market fluctuates, so there are small differences, but as you've seen, you can quickly and easily rebalance a portfolio with just a few clicks.

There is one last thing I'd like to add for those who may be listening to us for the first time and have seen us enter at mid price. I'd like to specify that this instrument is available only to those who have subscribed the market data with Interactive Brokers.

There's no problem for those who haven't subscribed to them. You can still follow the signals. You won't have the mid price, but anyway, in a very liquid market, there should be no problem to manually insert the price limits around the price that you're currently trading at, picking another reference or investing or whatever reference you have.

I also add that for small rebalances you can use market orders because, as you have seen, they aren't particularly large orders. Beyond the first purchase where we're going to invest the whole portfolio, the others are small periodic rebalances, so it's always better to have live market prices, but when you don't have them, using market orders is also ok.

And that's all for today. I'll see you at this point next month for the next rebalance.

What we've seen is that systematic trading isn't only limited to trading systems, but also has other applications in the world of finance, such as asset allocation models.

And if you are interested in systematic trading and want to learn more about this approach, we'll leave you a link in the description below that will definitely be useful. You'll be able to access a free video presentation by Andrea Unger introducing you to systematic trading. Or you can get our book, the best seller "The Unger Method", just by paying the shipping costs. Or you can book a free call with a member of our team for a free strategic consultation.

So guys, before saying goodbye, I’d like to thank you for your attention.

I invite you to leave us a Like if you liked the video and to subscribe to our channel and click on the notification bell to be updated on the release of all our new videos.

Again thanks so much and we'll see you in our next video! Bye-bye for now!

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We’ll help you map out a plan to fix the problems in your trading and get you to the next level. Answer a few questions on our application and then choose a time that works for you.

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Francesco Placci

Hi, I'm Francesco Placci, a professional trader since 2005 thanks to the systematic approach to the markets.

My skills range from trading on index futures to bonds, from stocks to commodities, with a particular focus on volatility and options, which I consider to be among the most versatile and fascinating instruments available to traders.

After an experience with leading Italian credit institutions where I learned the basics of institutional finance, I became a successful independent trader, with great personal satisfaction.

Founder of Algoritmica.pro, in 2019 I joined Unger Academy as head of Research and Development.