Gondinero Index Financial Education

1. What “rebalancing” really means (no jargon)

Rebalancing simply means:

From time to time, you gently bring the portfolio back to its original proportions.

You are not predicting markets.

You are not reacting to news.

You are just keeping the structure intact.

Why it works:

. Assets that grow fast are trimmed a bit

. Assets that lag get topped up

. Risk stays roughly constant over time

It’s like adjusting tire pressure — not rebuilding the car.

2. A practical rebalancing rule (simple & realistic)

Frequency: Once per year is enough

. Pick a fixed date (e.g. every January or every birthday)

. Avoid quarterly or monthly tinkering — it increases costs and stress

Tolerance bands (very important)

Instead of rebalancing mechanically, use bands:

. Only rebalance if an asset deviates relatively by 20% from its target

Example:

. NASDAQ target: 15% –

. Action only if it moves relative 20%: falls below 12% or rises above 18% of the total portfolio value.

This avoids:

. Unnecessary trades

. Fees

. Tax events

3. How to rebalance without selling (tax-friendly)

The most tax-efficient method is:

. Use new money first

If you invest regularly: Direct new contributions to the underweighted assets, often no selling is needed at all

. Use the cash-like component smartly

The Smart Overnight Return building block is extremely useful:

. It can act as a rebalancing buffer

. You can gradually shift it into equities after large drawdowns

. This usually creates no capital gains tax

This is elegant and underrated.

4. When selling is unavoidable

Sometimes markets move a lot. If selling is required:

Best order (generally speaking)

. Sell assets with losses or small gains first

. Avoid selling assets with large unrealized gains unless necessary

Tax logic (globally relevant)

. Capital gains tax is triggered only when you sell

. Long holding periods are usually tax-favored

. Frequent trading is almost always tax-inefficient

Even though tax rules differ by country:

. Low turnover = good everywhere

. Deferral of taxes = powerful compounding effect

5. Bank fees & transaction costs (the silent enemy)

For a long-term investor: What matters most

. Number of transactions, not timing precision

. Avoid small, frequent trades

Good practice:

. Bundle trades into one annual rebalancing

Prefer brokers with:

. Flat or capped fees

. No custody fees

. No percentage-based trading fees

Even small fees compound negatively over 10 years.

6. Currency & domicile considerations (international view)

General principles that work almost everywhere:

. Don’t rebalance because of currency moves

. Currency risk is part of global diversification

. Avoid unnecessary conversions (FX fees add up)

7. What not to do (equally important)

X Don’t rebalance emotionally after headlines

X Don’t chase last year’s winner

X Don’t optimize taxes so aggressively that you destroy discipline

X Don’t rebalance more often “just because you can”

A good portfolio fails more often from over-activity than from neglect.

8. One-sentence strategy summary

Once per year, only if deviations are meaningful, preferably using new money or cash reserves, with minimal selling and minimal transactions.

That’s it.

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One sentence:

I don’t need your money. But many other people do.

If we want to increase the value of money in a meaningful way, we should think about what ONE MORE euro or one dollar means to people like us — and what it means to a 17-year-old woman in Colombia who has been left on her own and has to raise two children. If those children do not receive proper education, their chances are high that they will end up in gangs or in prison.

Even in Germany, I financially support sports clubs to help get children off the streets and give them the opportunity to participate in training camps for soccer, athletics, or any other sport they want to explore.

If you would like to support me with a small percentage of the money you may have gained from my strategy, you can send a small amount to my PayPal account. Just ask me.