Question

Rebalancing Belushi

Professor Belushi has a retirement account with Vanguard with assets of $360,809.37, allocated as shown in Table 1.

He’s decided to rebalance his portfolio, so that looks like the allocation in Table 2. For example, he wants to sell his shares of the Europe Index Fund and buy shares of the Mid-Cap Index Fund.

Belushi is on the Vanguard web site and about to place fund-to-fund trade orders, when he reads the following notice:

“Vanguard has a policy restricting index fund exchanges. If you sell or exchange shares of an index fund, you won't be able to exchange back into that fund for 60 days.”

What is a feasible set of trades that will accomplish Belushi’s rebalancing?

Table 1: Current Allocation

Fund Number	0079	0072	0040	0028	0009	0024	0048	0081
Symbol	VEURX	VPACX	VFINX	VWESX	VIGRX	VEXPX	NAESX	VWIGX
Fund Name	Europe	Pacific	USA	Bonds	Growth	Explorer	Small-Cap	International
Allocation (%)	8.8%	17.4%	5.8%	13.1%	4.2%	13.1%	17.5%	20.1%

Table 2: Desired Allocation

Fund Number	0072	0040	0009	0081	0859	0123	0051
Symbol	VPACX	VFINX	VIGRX	VWIGX	VIMSX	VGSIX	VGENX
Fund Name	Pacific	USA	Growth	International	Mid-Cap	REIT	Energy
Allocation (%)	15.0%	15.0%	10.0%	15.0%	15.0%	15.0%	15.0%

Hint: Please use Solver function in Excel. This is the homework for Excel Modelling class

Answer 1

Table 1: Current Allocation
Fund Number	79	72	40	28	9	24	48	81
Symbol	VEURX	VPACX	VFINX	VWESX	VIGRX	VEXPX	NAESX	VWIGX
Fund Name	Europe	Pacific	USA	Bonds	Growth	Explorer	Small-Cap	International
Allocation (%)	8.80%	17.40%	5.80%	13.10%	4.20%	13.10%	17.50%	20.10%
	31751.22	62780.83	20926.94	47266.03	15153.99	47266.03	63141.64	72522.68	360809.37
Buy/sell	0.00	-8659.42	33194.46	0.00	20926.94	0.00	0.00	-18401.28
Table 2: Desired Allocation
Fund Number	72	40	9	81	859	123	51
Symbol	VPACX	VFINX	VIGRX	VWIGX	VIMSX	VGSIX	VGENX
Fund Name	Pacific	USA	Growth	International	Mid-Cap	REIT	Energy
Allocation (%)	15.00%	15.00%	10.00%	15.00%	15.00%	15.00%	15.00%
	54121.41	54121.41	36080.94	54121.41	54121.41	54121.41	54121.41	360809.37
Final	72	40	9	81	859	123	51
	VPACX	VFINX	VIGRX	VWIGX	VIMSX	VGSIX	VGENX
	Pacific	USA	Growth	International	Mid-Cap	REIT	Energy
	15.00%	15.00%	10.00%	15.00%	15.00%	15.00%	15.00%
	62780.83	20926.94	15153.99	72522.68	54121.41	54121.41	54121.41
	54121.41	54121.41	36080.94	54121.41	54121.41	54121.41	54121.41