Rebalancing a Stock and Cash Portfolio to a Target Allocation

Summary

This simple allocation routine estimates the portfolio share held in stock by valuing the stock position at the latest ticker price and comparing it with total account value, including cash. It uses a target stock allocation and a tolerance band: when the observed share moves far enough above the band, it sells stock; when it falls far enough below, it buys. The trade amount is calculated to move the portfolio back toward the target.

The listed defaults set a target position of 0.5 and an adjustment threshold of 0.1. The routine checks periodically, cancels pending orders after a trade, refreshes account information, and records total account value. No backtest, asset specification, or performance evidence is provided. The example does not describe transaction costs, slippage, order execution safeguards, or handling of failed orders, all of which can affect real-world rebalancing.

Key ideas

• The routine measures stock exposure as the marked value of stock divided by total portfolio value.
• It trades only when exposure leaves a tolerance band around the target allocation.
• Trades are sized to move the allocation toward the target using current prices.
• The example provides no performance evaluation and omits several real-world execution considerations.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.