I ran a test using annual rebalancing with TECL (Direction Technology Bull 3X Shares) over 5 years and encountered a number of issues. The first time annual rebalancing came around, AIM was fully invested and out of cash. To rebalance at this point would require selling half the shares owned at a loss, since the price at that point was the lowest in the test to that point. I punted and didn't rebalance.
I then changed the frequency to every 6 months, and over the 5-year period there was only one period where cash exceeded the initial 50% ratio, so only one rebalance was performed in the 5-year test.
The rebalancing recommendation in Weber's book didn't specify any conditions, such as only when cash exceeds the 50% value. Even with the single rebalancing performed, it hurt overall performance slightly, resulting in $1,800 lower gains over the period. I can see possibly using this strategy to reinvest excess cash in the security if it continues to trend higher, but in actual practice it doesn't seem like a good strategy in any other condition.
Anyone using periodic rebalancing? Again, I'm testing using 3X ETFs. It probably works better with non-leveraged investments.
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