You will be able to write one rebalancing rule that covers your index funds and your single stocks.
One rebalancing rule should cover your whole portfolio, the index-fund core and the single-stock satellite, with a number on every threshold. Funds and stocks follow different halves of that rule, but both are checked on the same dates and paid for from the same cash.
Marcus wrote a rebalancing policy for his funds in the course Build and run an ETF portfolio. It said nothing about single stocks, because at the time he treated them as a side project. After module 11 his rulebook has targets and limits for each stock, and four breaches waiting to be fixed: the bank, the chip designer, the S-REIT cluster, and Larkspur, which is underweight. A rule that covers only half the portfolio leaves the other half to mood.
The core rule does not need redesigning. Lesson 6.2 of Build and run an ETF portfolio, "Calendar or threshold rebalancing", gave you calendar or threshold rebalancing: you rebalance on a fixed date, when a holding drifts outside a band around its target, or both. Bring your existing rule across and use the new core targets from lesson 12.1, "Core and satellite: where stock picks sit next to index funds".
Marcus checks weights at a yearly review each January and after any fall of 20% or more in world shares. A core fund is rebalanced if the world ETF is more than 5 percentage points from its 52% target, or any other fund is more than 2 points from its target. Those 5 and 2 points are his bands, the drift allowed before a trade is triggered.
Stocks cannot be rebalanced like funds, because buying more of a stock is a fresh decision about one company. The stock half of the rule has two parts that work differently.
Mechanical trimming comes from lesson 11.3, "Position and sector limits, and concentration risk". Any stock more than one point above target is trimmed back to target at the review, and no thesis argument overrides a trim, since holding firm is the purpose of a limit.
Conditional adding comes from lesson 11.4, "Thesis review instead of price stops". A stock below target is topped up only if its thesis review says the thesis is intact. If the review says weakened, the stock stays where it is until the next review. If it says broken, the stock is sold. A price fall is never on its own a reason to add, which stops the rule from automatically buying more of a failing company.
Groups have their own limit too. The cluster cap from lesson 11.5, "Correlation clusters: hidden bets across your holdings", can force a trim even when no single stock breaks its own limit.
Every trade costs a spread and a commission, and selling can crystallise a gain. Rebalancing with cash that is arriving anyway avoids most of those costs. Lesson 6.3 of Build and run an ETF portfolio, "Rebalance cheaply with new contributions", directs each new deposit, dividend and coupon to whatever holding is furthest below target. Marcus does the same with his new money, dividends and distributions, and sells only what the rules still require after that.
Small trades cost more than they fix, so Marcus skips any trade under S$1,000 and moves that cash to the largest buy.
Marcus's portfolio is about S$202,000 (his holdings are invented example figures). His targets are world ETF 52% (S$105,040), bond fund 15% (S$30,300), STI ETF 10% (S$20,200), T-bills 5% (S$10,100), bank 5% (S$10,100), S-REIT 5% (S$10,100), Larkspur 4% (S$8,080) and chip designer 4% (S$8,080).
The bank, at S$16,000, is more than a point over target, so he sells about S$5,900. The chip designer, at S$15,000, is over target, so he sells about S$6,920. The S-REIT, at S$12,000, is 5.9%. That does not trigger the single-stock rule but breaches the cluster cap, so he sells about S$1,900. Total sales are S$14,720.
Strictly, the targets call for buys of S$14,040 in the world ETF, S$300 in the bond fund, S$200 in the STI ETF, S$100 in T-bills and S$80 in Larkspur. After the S$1,000 floor, all S$14,720 goes into the world ETF instead, which ends at about 52.3%, inside its band.
He then reruns the review with his S$8,000 January deposit. S$202,000 plus S$8,000 gives a portfolio of S$210,000, and the targets rise with it. The bank sale becomes about S$5,500, the chip designer about S$6,600 and the S-REIT about S$1,500, so total sales fall to S$13,600. New money plus sales fund S$18,200 into the world ETF, S$1,500 into the bond fund, S$1,000 into the STI ETF and S$500 into T-bills. Larkspur's S$400 top-up falls under the S$1,000 floor, and it would also need an intact thesis review.
The deposit saves only about S$1,100 of selling here, because the stock breaches were big. In an ordinary year with no limit broken, new money alone usually does the whole rebalancing job.
His sales of the bank and chip designer, after years of holding, fit the occasional rebalancing sale to meet a limit that Tax & Reliefs: how your income tax works and the reliefs you can claim, lesson 5.1, "Dividends, interest and investment gains", describes as part of investing rather than trading. Lesson 12.4, "Tax on gains and dividends: check how IRAS treats you", explains why the pattern of trades still matters for tax.
A rebalancing rule passes if another person could apply it with your workbook and reach the same trades. Words such as "significantly" or "when it feels right" fail, so every threshold must be a number. Marcus writes his final rule into the space he left in his rulebook:
Check every weight each January and after any 20% fall in world shares. Core funds go back to target if the world ETF is more than 5 points from 52%, or another fund is more than 2 points from target. Any stock more than one point over target is trimmed to target. Any group over its cluster cap is trimmed to fit. Stocks below target are topped up only if their thesis review says intact. New money and dividends go first to whatever is furthest below target. Trades under S$1,000 are skipped.
At each review, compute target values from the current total including any new money, make the stock and cluster trims, rebalance core funds outside their bands, check the thesis review for stocks below target, send incoming cash and sale proceeds to the biggest gaps, sell only what the rules still require, and move any skipped trade's cash to the largest buy.
Get your current holdings, their values in SGD and your targets from module 11 into one table, ready to apply your rule.
Write a rebalancing rule for your core funds and your stock positions, then apply it to your current weights.
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