I have a preferred allocation of the few funds in my portfolio. Every month, when I get my paycheck, I add an equal amount to my portfolio. When I do so, I look at what's underweighted and buy that, so every month I try to rebalance. I do this only monthly, meaning I'm not checking daily/weekly to rebalance. I try not to sell to rebalance, instead just use new money to rebalance.
- As the title, should I turn DRIP on or leave it off? Right now it's off, and same idea, when I get dividends I buy whatever is underweighted. I read one post somewhere that DRIP should ideally be on to gain momentum and then rebalance less often. So whether you say on or off, curious why it's better one way or the other.
- Started this thread to ask about DRIP but while here, the way I rebalance, monthly allocating new money but not necessarily selling (maybe I'll check once a year of something is really off, but so far nothing has been so drastically off, only started investing 2 years ago, so haven't yet lived through massive market swings/corrections), is there a reason I should be doing differently?
Thanks 🙏🙏
DRIP – yes or no and why? Plan to invest the dividends, but should I reinvest versus buy underweights?
byu/Electronic_Bee3134 ininvesting
Posted by Electronic_Bee3134
2 Comments
How you’re doing it is fine. DRIP is nice for convenience because it’s all automated and you don’t have to think about it. But if you’re diligent about reinvesting it manually monthly, nothing wrong with that.
It’s also perfectly fine to maintain balance how you are doing it, buying what’s underweighted each month and doing a yearly rebalance only if needed.
I don’t know where you live but this way of doing it is probably more tax efficient because it means you don’t need to sell as much. You can just be always buying and maintain balance.
I’d probably keep DRIP off in your case. Since you’re already using new money + dividends to fix underweights, it gives you more control over your allocation. DRIP is great for simplicity, but it can push more money into already overweight positions. Your current monthly rebalance approach sounds solid and disciplined