Targets, Drift and Rebalancing
How to set allocation targets in Luum by asset class and by single security, how drift is measured, and what the rebalance simulator does and does not do.
Drift is what happens when you do nothing. The holdings that go up become a larger share of the portfolio, and the allocation you chose slowly becomes one you did not. Targets let Luum measure that gap for you. Targets, drift and the rebalance simulator are on the Investor and Wealth plans.
Setting targets
Open Goals and set the share of the portfolio you intend for each asset class. You can also set targets by region and by sector, a limit on any single position, and targets by currency.
Allocation is measured across your portfolios, not inside one. If your RRSP holds all the bonds and your TFSA all the equities, each looks lopsided on its own and the combination may be exactly on plan.
Targets for individual securities
Under Goals → Securities you can give one security its own target inside its asset class, for example one broad ETF as part of your equity target. The security's target comes out of its class, and the rest of the class is shared by the class's other holdings in proportion to what they are worth today.
A few rules keep the plan consistent:
- A listing is an identity. The same ticker on two exchanges is two securities with two targets.
- Some combinations cannot be saved. The security targets in a class cannot add up to more than that class's target, and the same goes for each currency when you have set currency targets. A security target cannot be above your limit on a single position.
- Regions and sectors only warn. A fund spreads across many regions and its split is an estimate, so Luum tells you when your security targets push a region or sector past its target and still lets you save.
- Selling a security does not remove its target. The line is marked Not held until you change the plan.
You can target a security you do not hold yet, as long as Luum has data for it.
How drift is measured
Drift is the gap between your target and what you actually hold, in percentage points, not as a percentage of the target. A category with no target has no plan to drift from, and shows a dash rather than a breach.
Each portfolio has a drift alert you can set on the Goals page, which notifies you when any category moves past the threshold you choose.
The rebalance simulator
The simulator answers one question: what trades would bring the portfolio back to the plan you saved? It opens on that plan, counts cash as money to spend, and shows the resulting allocation by asset class, region and sector before you decide anything.
What it does not do:
- It does not place trades. Luum has read-only access to your brokerage and no way to trade. The output is a list you would act on yourself.
- It does not optimise for tax. In a non-registered account a sale that closes drift can realise a capital gain. Directing new contributions to the underweight class, or correcting inside registered accounts first, avoids that, and the choice is yours.
Luum measures the gap. Whether the gap is a problem, or whether the plan itself should change, is your call. See how portfolio returns are calculated for the performance side of the same portfolio.