January 2025
WELCOME
Welcome to The Crazy Plan where our mission is to show that anyone can create unimaginable wealth.
Each month, we publish a blog providing readers with the financial education needed to set out on their own journey to a bright financial future. We do this by following two plans, our Monthly Plan saves £50 a month for 10 years and our Lumpsum Plan starts with a one-off £10,000. Our aim is to turn each plan into $1 billion in one or two generations.
At first, making $1 billion seems crazy but once you realise it’s a journey then things change. We’ll save our first £50 and from there our wealth will build to $1,000, then $5,000, then $10,000 and then $50,000. One day, if we’re patient, we’ll have $100,000 and then we’ll be looking at $1 million. From there it will be onwards to our $1 billion goal. This journey of small steps is how what seems impossible becomes possible.
You can dig-in to our posts however you like or if you are completely new to investing, you may want to start with “1.0 Liftoff!” and go through them in order which is how we build the education. We hope to provide you with the knowledge needed to set out on your own journey to a bright financial future if you choose. You can also visit the “About” page on our website to learn more about our plan.
All readers must read and agree to our Terms & Conditions, including the Disclaimer, which can be found on the T&C page of our website: https://thecrazyplan.com
ON WITH THE PLAN
Last month we reviewed our first year, how quickly a year has gone and only another 80 to go! Our posts for the second year now begin with a 2. and we’re going to start by looking at something called rebalancing.
WHAT IS REBALANCING?
Our Lumpsum Plan will be worth $1billion in: 78yrs 9mths
Our Monthly Plan will be worth $1billion in: 88yrs 6mths
Back in post “1.11 Disasters & Solutions” we said that one option to reduce risk was to diversify by buying more than one investment. Say we buy 2 stocks: £1,000 of Winner Co; and £1,000 of Loser Co. Over the next year Winner Co goes up 5-fold and is worth £5,000 and Loser Co halves and is worth £500 so our portfolio is worth £5,500. It was definitely right to diversify as we wanted to put all our money into Loser Co!
Unfortunately, this has caused us a problem as Winner Co is now 91% of our portfolio and so we’re no longer diversified. We can correct this by rebalancing our portfolio back to equal weights of £2,750 each by selling £2,250 of shares in Winner Co and using the proceeds to buy £2,250 of shares in Loser Co. Our portfolio is now nicely diversified again. So, the purpose of rebalancing is to keep us diversified so that we avoid losing too much money on any one single investment.
REBALANCING – SINGLE STOCKS
This sounds great but what if Winner Co continues to go up and Loser Co keeps going down? In post 1.11 we saw that share prices can go down by 50% or even cause a total loss so is buying more of Loser Co a good idea? Also, Winner Co was winning so why sell when things are good? These are two of the biggest mistakes people make in investing. Mistake one is “hoping” an investment that’s lost money will recover and even adding to it but this usually turns out to be a terrible decision and the losses get bigger. Mistake two is taking profits too quickly, worrying about losing them, only to watch the shares make new highs just after selling. In general then, rebalancing a portfolio of single stocks can be a very bad idea unless you’re confident in your ability to avoid losers.
REBALANCING – MARKETS IN GENERAL
Outside of single stocks things can be different. Let’s say we have a portfolio of £1,000 of the S&P500 and £1,000 of the DAX40, the largest 40 companies on the German stock market. Over the last 50 years they’ve both made around a 10% CAGR and let’s assume that continues. If we never rebalance, the weights will remain around 50% / 50% but will fluctuate. When the S&P outperforms they might move to 60% / 40% then to 40% / 60% as the DAX outperforms. We’ve made some numbers up in the following table:
| Investment | S&P500 | DAX40 | Portfolio |
| £ Invested Yr 1 | 1,000 | 1,000 | 2,000 |
| Return | 30.00% | (10.00%) | 10.00% |
| £ Value Yr 1 | 1,300 | 900 | 2,200 |
| £ Invested Yr 2 | 1,100 | 1,100 | 2,200 |
| Return | (6.92%) | 34.45% | 13.77% |
| £ Value Yr 2 | 1,024 | 1,479 | 2,503 |
| Investment CAGR | 10.00% | 10.00% | 11.87% |
| £ CAGR Value Yr2 | 1,210 | 1,210 | 2,420 |
After a year the S&P is up 30% and the DAX has lost (10%) and our portfolio is worth £2,200 with £1,300 being in the S&P. We rebalance to £1,100 in each, selling £200 of the S&P and buying £200 of the DAX. The next year the S&P loses (6.92%) and the DAX makes 34.45% so our portfolio is now worth £2,503. If we hadn’t rebalanced the last line shows we’d be worth £2,420. Each investment made a 10% CAGR over the 2 years but followed a different path. Rebalancing took advantage of this in two ways: we had less money in the S&P when it sold off; and we had more money in the DAX when it recovered. As a result, we made an 11.87% CAGR compared to 10% if we’d not rebalanced.
So, if we own investments that are themselves diversified (the S&P500 is 500 companies and the DAX40 is 40 companies so each is effectively a portfolio of stocks) and over the long run we believe they will return similar CAGRs, rebalancing can be a good idea. The main reason for rebalancing is to keep us diversified which reduces our risk of loss from a single disaster. Remember, we’re not just trying to make the highest return regardless of risk. We’re trying to increase our chance of success and a happy side effect of that might be that we also improve our CAGR but that’s not our primary goal.
HOW TO REBALANCE
There are many ways we could rebalance but one approach is to check our portfolio daily and rebalance when the weighting of our largest investment gets too big or our smallest gets too small. The problem with daily checking is that it creates a lot of work and costs as we’ll rebalance more and will incur costs each time. Even checking monthly could still involve a lot of time and costs.
Instead, we could automatically rebalance once a year back to equal weights and this will save us a huge amount of time and keep costs down. We might miss some opportunities compared to checking daily but over the long run things should average out. Rebalancing once a year sounds like a good idea so how exactly do we do it?
REBALANCING THE CRAZY FUND
We use four main steps to rebalance and we’ll use the following table to explain the first 3. This is not as bad as it looks, it’s just that The Crazy Fund has 10 investments so everything has to be done 10 times!
| Step 1 -> | Step 2 -> | Step 3 -> | ||||
| Ticker | Price £ | Value £ | % Fund | Sell/Buy £ | Shares | Order |
| LON:IEM | 3.8550 | 835 | 6.30% | 490 | 127.2 | 4 |
| LON:SMT | 9.9120 | 1,186 | 8.95% | 139 | 14.0 | 3 |
| LON:XDEM | 55.0100 | 1,377 | 10.39% | (52) | (0.9) | |
| LON:ATT | 4.1950 | 1,406 | 10.61% | (81) | (19.3) | |
| LON:IITU | 27.4700 | 1,215 | 9.17% | 110 | 4.0 | 2 |
| LON:PCT | 3.5350 | 1,175 | 8.87% | 150 | 42.4 | 5 |
| LON:XDWT | 77.2544 | 1,556 | 11.74% | (231) | (3.0) | 1 |
| LON:CSP1 | 507.0950 | 1,393 | 10.51% | (68) | (0.1) | |
| LON:EQQQ | 418.8250 | 1,533 | 11.57% | (208) | (0.5) | 1 |
| LON:JAM | 11.3800 | 1,545 | 11.66% | (220) | (19.3) | 1 |
| Shares | 13,220 | 99.77% | ||||
| Cash | 30 | 0.23% | ||||
| Total | 13,250 | 100.00% |
Step 1: Get the live share prices and then value each investment and the portfolio overall
Let’s randomly say its 08/Jan and we want to rebalance. The first thing we do is get the live share prices for our investments which are “Price £” in the table. “Live” means the prices right now that we can deal at and they constantly move around during the day as investors buy and sell shares so we take a snapshot.
We use these prices to value each investment in the “Value £” column then add them all up to get the total value of all our investments which is £13,220. We also see how much cash we have which is £30 and so in total The Crazy Fund is worth £13,250. The “% Fund” column shows how close we are to our target 10% equal weighting. For example, IEM has a live share price of £3.855 and our investment is worth £835 which is 6.30% of the Fund value of £13,250.
XDWT is actually a $ investment. The share price was $95.95 and our investment was worth $1,932. We need everything in £ so we can add everything up so we divided the price and value by the live GBPUSD FX rate which was 1.2420. Remember, the GBPUSD FX rate means how many $ can we buy for £1 so if a share costs $95.95 we only need £77.25 to buy it and if we own $1,932 of shares, they are worth £1,556. Yes, currency again!
Step 2: Estimate the trades needed to rebalance the portfolio
Rebalancing to equal weights means an average of £1,325 per investment (Fund value £13,250 / 10 investments). For IEM, the current value of our investment is £835 so we need to buy £490 more of shares as our investment is currently too small. At a share price of £3.855 that means buying 127.2 shares (£490 / £3.855). For EQQQ, the current value is £1,533 so we need to sell £208 of shares as our investment is currently too big. At a share price of £418.825 that means selling 0.5 shares. If you’re charged costs to deal then you’ll also need to take those into account before calculating the number of shares but to keep it simple we’ve assumed there are no costs.
Step 3: Work out the order to execute the trades in
The “Order” column shows the order that we’ll execute our trades in. As XDEM, ATT and CSP1 are really close to the target 10% holding we’ll do nothing. Next we’ll sell the investments that are too big to generate the cash we need to buy shares later on and we can sell in any order. Then we’ll use the cash we have from selling to buy the investments that need increasing, starting with the highest share price first and then working down to the smallest share price last so we invest as much of our cash as possible.
For example, say we have £1,500 of cash and want to buy £500 of Small Price (share price £5) and £1,000 of Big Price (share price £500). If we buy 100 shares of Small Price first we spend £500 and are left with £1,000 to buy Big Price. If its share price has gone up to £501 we can only buy 1 share and are left with £499 of cash. Instead, if we buy 2 shares of Big Price first we spend £1,002 and are left with £498 of cash to buy Small Price. We can buy 99 shares of Small Price for £495 and end up with £3 of cash which is much better than ending up with £499. We want to invest as much of our cash and get as close to equal weightings as we can and buying the largest share prices first will do this.
Step 4: Execute the trades to rebalance the portfolio
The next table shows how we rebalance using some random prices:
| Step 4 -> | ||||||
| Ticker | Shares | Price £ | Proceeds £ | Cash £ | Value £ | % Fund |
| Start Cash: | 30 | |||||
| LON:XDEM | 30 | 1,377 | 10.39% | |||
| LON:ATT | 30 | 1,406 | 10.61% | |||
| LON:CSP1 | 30 | 1,393 | 10.51% | |||
| LON:EQQQ | (1) | 416.74 | 417 | 447 | 1,116 | 8.43% |
| LON:XDWT | (3) | 76.87 | 231 | 678 | 1,325 | 10.00% |
| LON:JAM | (19) | 11.33 | 215 | 893 | 1,330 | 10.04% |
| LON:IITU | 4 | 27.61 | (110) | 783 | 1,325 | 10.00% |
| LON:SMT | 14 | 9.97 | (140) | 643 | 1,325 | 10.00% |
| LON:IEM | 127 | 3.88 | (493) | 150 | 1,327 | 10.02% |
| LON:PCT | 42 | 3.56 | (150) | 0 | 1,325 | 10.00% |
| Shares | 13,249 | 55.86% | ||||
| Cash | 0 | 0.00% | ||||
| Total | 23,716 | 100.00% |
We can only buy and sell whole shares (see fractional shares in post “1.8 Investing Small Amounts & Correlation”) and so we’ll round the number of shares we need to trade to a whole number. We start with the fund’s £30 of cash as shown in the “Cash £” column. We do nothing with XDEM, ATT and CSP1 and so still have £30 of cash. Next we sell 1 share in EQQQ at £416.74 for proceeds of £417 and add this to our cash leaving us with £447 of cash. We then sell XDWT and JAM ending up with £893 of cash. Now we buy the shares we need starting with IITU and finally buying 42 shares in PCT leaving us with no cash.
The table also shows the “Value £” of each holding as well as the “% Fund” after our rebalancing. We’re a little under on EQQQ but it’s hard to rebalance as its share price is so big but we’re not worried, we’ve ended up fully invested and are nicely diversified.
SUMMING IT ALL UP
We realise this post might not be the easiest of posts and is rather dry but it’s a really important part of running a portfolio. We could have taken a shortcut but when we start to have serious money, we need to know how to do things properly. By doing things properly from the start, by the time we’re rebalancing a multi-million pound portfolio we’ll have performed dozens and dozens of rebalances and will be confident in what we’re doing. Rebalancing keeps us diversified and that reduces our risk of a large loss from a single investment.
THE INVESTMENT REPORT
For an explanation of The Investment Report and The Crazy Fund please see our post “1.1 The Deep End”
| Fri 31-Jan-25 | Monthly Plan | Lumpsum Plan |
| Cash last month £ | 300 | 0 |
| Cash Saved £ | 56 | 0 |
| Unit buys / sells £ | (299) | 0 |
| Total Cash £ | 57 | 0 |
| Units last month | 252 | 10,000 |
| Units bought / sold | 231 | 0 |
| Total Units owned | 483 | 10,000 |
| Unit Price £ | 1.3361 | 1.3361 |
| Fund Value £ | 645 | 13,361 |
| Total Wealth £ | 702 | 13,361 |
| FX Rate | 1.2407 | 1.2407 |
| Total Wealth $ | 871 | 16,577 |
| Estimated CAGR | 15.00% | 15.00% |
| Years to $1billion | 88yrs 6mths | 78yrs 9mths |
On 02/Jan the Monthly Plan invested the £300 of savings it had at 31/Dec and bought 231 units in The Crazy Fund at a unit price of £1.2944 and now owns a total of 483 units. £300 is a small amount of money for investing and our post “1.8 Investing Small Amounts & Correlation” went over various options for investing small amounts. We saved £50 into the Monthly Plan as usual and also received £6 of interest on our savings. Each month our £50 goes into a savings account with a bank and once a year we receive interest. Note that in this month’s post we said that on 08/Jan there were only 10,252 units as we excluded the above purchase of 231 units by the Monthly Plan. We did this to be consistent with post 1.12 at 31/Dec.
THE CRAZY FUND
| Results | 31-Dec-24 | 31-Jan-25 | MTD Move | YTD Move | LTD Move |
| Unit Price £ | 1.2796 | 1.3361 | 4.42% | 4.42% | 33.61% |
| FX Rate | 1.2514 | 1.2407 | (0.86%) | (0.86%) | (2.49%) |
| Unit Price $ | 1.6013 | 1.6577 | 3.53% | 3.53% | 30.30% |
| CAGR £ | 27.90% | 30.55% | 2.65% | 2.65% | 30.55% |
We’ve updated the above table to show Month-To-Date (“MTD”), Year-To-Date (“YTD”) and Life-To-Date (“LTD”) results. Our investments made us over 4% during the month but the FX rate moved against us so overall The Crazy Fund was up 3.53% in USD.
The eagle-eyed reader will notice the green line in the chart, which is how long it will take us to reach £1billion on the Monthly Plan, has moved above the Target line. This is due to the effect of the FX rate which has moved against us. When we started on 01/Jan/2024 the rate was 1.2723 so we needed £786million to be worth $1billion ($1billion / 1.2723). The rate this month was 1.2407 so we now need £806million which is £20million more. As a result, we’ll need to stay invested for longer to reach our goal.
Below is a table of what the fund is invested in at 31/Jan:
| Ticker | % Fund | Price | CCY | Type | Description |
| LON:IEM | 10.0% | 407.00 | GBP | IT | Impax Environmental Markets PLC |
| LON:SMT | 10.2% | 1,085.50 | GBP | IT | Scottish Mortgage Investment Trust PLC |
| LON:XDEM | 10.1% | 5,744.50 | GBP | ETF | DB X-Trackers MSCI World Momentum Factor UCITS |
| LON:ATT | 10.0% | 443.00 | GBP | IT | Allianz Technology Trust PLC |
| LON:IITU | 9.9% | 2,702.50 | GBP | ETF | iShares S&P 500 Information Technology |
| LON:PCT | 10.2% | 375.00 | GBP | IT | Polar Capital Technology Trust PLC |
| LON:XDWT | 9.7% | 95.50 | USD | ETF | Xtrackers MSCI World Information Technology UCITS |
| LON:CSP1 | 10.0% | 52,148.00 | GBP | ETF | iShares Core S&P 500 UCITS (Acc) GBP Hedged |
| LON:EQQQ | 9.9% | 42,842.00 | GBP | ETF | Invesco NASDAQ 100 UCITS GBP Hedged |
| LON:JAM | 10.0% | 1,178.00 | GBP | IT | JP Morgan American Investment Trust PLC |
| Shares | 100.0% | ||||
| Cash | 0.0% |
There was a reason for this months’ post on rebalancing, on 29/Jan we rebalanced The Crazy Fund and at the end of the month we now have the above weightings.
*** Please Subscribe!
If you find our posts helpful in building a bright financial future then in exchange, please sign up to receive them by email. The more people that subscribe the more we grow which means we can create more content to help you become unimaginably wealthy. You can sign up using the subscribe box at the top of our website: https://thecrazyplan.com
*** Please Spread The Word!
This blog is free as we want everyone to have access to financial education. We hope to inspire you to set out on your own journey to a bright financial future and if we do, in return please spread the word to others.
NEXT MONTH
In post “1.1 Disasters & Solutions” we said our plan would be to “Employ a Professional” and use “Index Investing”. Next month, we’re going to start to look at how we can do this by expanding our knowledge of Funds.
DISCLAIMER
Please note that by the time this blog is published, we may no longer own some or any of the investments discussed. Strategies and investments discussed might be totally unsuitable for you and we are not recommending them to you, they should only be considered as ideas for further research. You must read and agree to our Terms & Conditions, including the Disclaimer, which can be found on the T&C page of our website: https://thecrazyplan.com
© TradeFloor Promotions Limited 2025
The Crazy Plan 