We recommend reviewing our My Portfolios article before diving into Portfolio Rebalancing.
Classic Portfolio Settings
After syncing your holdings or entering them manually, we suggest adjusting the portfolio settings below.
These settings help Scrab better understand how to allocate and rebalance your portfolio based on your preferences.
Uncollapse each setting to learn more about each one:
Allocation
Allocation
This setting is important as it lets Scrab know how to distribute your available uninvested cash, depending on your maximum number of companies and which weight you'd like Scrab to allocate.
Companies Number: Reflects the maximum number of companies your portfolio should have.
Available Cash: Lists the amount of uninvested cash you have. You may have to periodically update this to account for transaction fees, dividends, deposits, and payouts.
Select how you would like the weights of your stocks to be determined.
Asset Allocation: Choose from four options:
Equal Risk - Each asset will carry the same amount of risk, determined by comparing the historical price changes and the potential for loss among all the stocks you're considering.
Equal Weights- All assets will have the same position size.
Hierarchal Risk Parity- Each asset will share the risk equally, grouping similar assets to achieve a well-balanced mix without putting too much weight on any asset.
Proportional to Metric—The asset weight will be directly or inversely proportional to the latest value of the selected metric.
Rebalancing
Rebalancing
You can adjust your portfolio to ensure each stock's share aligns with your strategy.
Market changes can skew values, so regular updates, like monthly, maintain your strategic distribution and consistency over time.
Next Rebalancing: Select a future date when you'd like to receive an email reminder to rebalance your portfolio. If you don't need any reminders, leave this blank.
Rebalancing Frequency: Enter the number of months you'd like rebalancing to occur.
Rebalancing Threshold: Set your preferred percentage threshold for rebalancing to avoid unnecessary small transactions. This ensures adjustments only happen when a position significantly differs from your target allocation.
NOTE: The rebalancing threshold for Scrab's backtest is set to 0%, meaning backtests simulate all necessary transactions to match asset weights exactly as calculated for each period. However, achieving this in real brokerage accounts is not feasible.
Suggest Top Companies:
If disabled, when rebalancing, Scrab keeps your current stocks and adjusts the quantities to balance your portfolio.
Scrab will suggest how much to buy/sell off your existing holdings or replace them with top companies from your base scoring model if enabled. This is useful if you trust your scoring model and want to hold the top companies it identifies.
Advanced
Advanced
In this setting, you can set up email alerts to notify you if there is an underweight or overweight difference between your current and planned positions.
We also provide you the Reduce Portfolio Turnover setting, which, if enabled, Scrab will not suggest any transactions for buy/sell if the Total Score difference between your current holdings and new companies is less than 1%.
Let's go ahead and create a Demo Portfolio. In this instance, we will manually add.
Managing Your Portfolio
Now that you have your holdings/company lists and have adjusted your settings, you can manage and rebalance your portfolio.
To update any transactions, you can edit the number of shares or click the Buy button to add. As you update transactions in your portfolio, Scrab will automatically calculate the rest of your portfolio.
Remember that Scrab will track and store your holdings, so any buy/sell transactions you record in Scrab, you will have to perform the actual transaction in your brokerage account.
However, if you made any transaction in your brokerage account, click the Refresh My Portfolio 🔄 icon next to your connected account.
NOTE: If you add a company to your Scrab Portfolio that is not in your brokerage account and click refresh, the company will disappear from your Scrab portfolio.
Rebalancing Your Portfolio
Scrab will send you an email reminder when it's time to rebalance your portfolio. You can click the button on the email or navigate to the Portfolios section in Scrab and then click the Rebalance button at the top right corner.
Based on your rebalancing settings, Scrab will recommend which holdings to buy or sell.
You can click on each transaction 1 by 1 or use the Make All Transactions button at the top right corner to save yourself time.
Suggest Top Companies Rebalancing
When selected, Scrab will consider your base scoring model and recommend buying, selling, or replacing a current holding with a top company from your scoring model.
This rebalance setting can be helpful if you have shown or feel that your Scoring Model is highly effective and would like a more custom portfolio management approach.
Planned Allocation: Overview vs. Rebalancing
Planned Allocation: Overview vs. Rebalancing
If you find the values in Planned Allocation in the Portfolio Overview different from those in the Rebalancing view, here's why:
Portfolio Overview
The Portfolio Overview shows planned allocations based on your current portfolio composition. For example, it might suggest you hold a specific number of shares (e.g., XXX shares of Company Z), assuming you don’t make any changes to your holdings.
Rebalancing View
The Rebalancing view, especially with the "Suggest Top Companies" option turned on, may recommend exchanging some companies for others. This could result in different planned allocations (e.g., YYY shares of Company Z) because the composition of your portfolio changes, and the correlations between assets will differ.
Why Are They Different?
Portfolio Overview Stability: Shows how far you are from your planned allocations with your current holdings. This approach prevents constant changes in recommendations, making it more stable.
Rebalancing Adjustments: This view suggests potential changes to improve your portfolio. If a company moves up or down in ranking, the planned allocations will adjust to reflect the best possible composition based on your chosen criteria.
Example Scenario
Imagine your current portfolio includes 100 shares of Company A and 200 shares of Company B:
Portfolio Overview: This section will show the planned allocations based on these current holdings.
Rebalancing View: If it suggests swapping Company A for Company C, the planned allocations will update accordingly, showing a new distribution (e.g., 150 shares of Company C and 150 shares of Company B).
Key Takeaway
The Portfolio Overview helps you understand how close you are to your ideal portfolio based on your current holdings. In contrast, the Rebalancing view offers suggestions for optimal changes, resulting in different allocations.
By understanding these differences, you can better manage and optimize your portfolio, making informed decisions about rebalancing and maintaining your investment strategy.
Let's look at an example of what this setting looks like.
From our example, via the Overview Tab, our portfolio originally started with 19 holdings out of 20, with assets totaling $288,831 and $50,000 in uninvested available cash.
Our current holdings include:
After rebalancing, via the Rebalancing view, Scrab suggested we make 11 sell and 10 buy transactions.
Remember to also make these transactions in your brokerage account.
With Top Companies being enabled, Scrab has recommended we buy 41.17 shares of MSFT and 292.16 shares of 7936.T (Asics), which are top companies based on our base scoring model.
You will know this is a new holding/company to add/buy to your portfolio as the current allocation column lists zero.
Now that we have rebalanced, our portfolio looks as follows:
Our new total assets holdings are $271,634, with $77,791 of available uninvested cash, and we only hold 16/20 holdings.
From here on, we can continue managing our portfolio or add any new holdings we've bought since, in our scenario above, our portfolio can have up to 20 companies.
Additional Settings
As you manage your portfolio in Scrab, we offer additional settings when hovering over a company in your portfolio's company list.
You will see the icons below:
View the Company Details page.
Pin this company. If you pin the company to your portfolio, Scrab will not consider it for any buy/sell suggestions.
Delete. If you wish to sell the holding completely, Scrab will delete it from your list, mark it as sold, and update your available cash accordingly.
And 5. Edit the number of shares and average price manually.