Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 03-23-2016, 08:20 PM   #21
Full time employment: Posting here.
 
Join Date: Apr 2015
Posts: 903
Quote:
Originally Posted by gauss View Post
BTW - I did not move into the Balanced Funds until after I ERd. When I was still working I liked to try to optimize my portfolio, try to time the market etc with hopes of reducing my time to FI.
Apparently, I suck at market timing, too. Hence, going full auto (investing and rebalancing) is better. No need to optimize for tax efficiency as I only have tax advantaged accounts right now.
__________________

__________________
hnzw_rui is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 03-23-2016, 09:48 PM   #22
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,431
Quote:
Originally Posted by CaliforniaMan View Post
I was wondering myself if there was any "magic" to this rebalancing thing. So I setup a quick and dirty spreadsheet to test different rebalance bands on return and volatility. Used CAGR for returns and Std Err of the regression on log price for variability. I just looked at returns with zero withdrawals and a 70/30 stock/bond portfolio.

Unsurprisingly, I guess, over long periods (monthly data from 1900) the less rebalancing the greater the returns. Of course because the stock percentage kept growing. The more rebalancing the lower the returns, there was no magic middle.

Looking at the monthly data from 1900 on, the STE plot was pretty flat with 0% (rebalancing every other month) up to 30% rebalancing band then increased volatility with larger rebalance bands.

Over 15 or 20 year periods there was a bit of bouncing around for both and except for a very few periods such as the 20 year period from 1970, the less rebalancing you did the better in terms of CAGR.

From what I saw you gain a little less volatility from rebalancing but not more often than using a 10% to 20% off band.

No magic from what I can tell. Just seemed to me rebalancing for the most part doesn't do much and rebalancing more often than using a 10% to 20% off band or more than once every year or two would not be worth the trouble.

I was hoping I would see some predictable or repeatable gain to rebalancing but unfortunately I didn't. I guess there is still no free lunch
If rebalancing hurts returns over long periods, then it is because over long periods stocks outperform bonds. So, the corollary is then one should be 100% in stocks, again over long periods.

But how about shorter periods? How about when one is in drawdown phase and no longer accumulating? Is there any point where having less than 100% stock helps?

In answering these age-old questions, we will keep reinventing the wheel, but that is fine. We want to be sure that we get a round wheel instead of a hexagonal or an oval one.
__________________

__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is offline   Reply With Quote
Old 03-24-2016, 05:27 PM   #23
Full time employment: Posting here.
CaliforniaMan's Avatar
 
Join Date: Dec 2013
Location: San Diego
Posts: 846
Quote:
Originally Posted by NW-Bound View Post
If rebalancing hurts returns over long periods, then it is because over long periods stocks outperform bonds. So, the corollary is then one should be 100% in stocks, again over long periods.

But how about shorter periods? How about when one is in drawdown phase and no longer accumulating? Is there any point where having less than 100% stock helps?

In answering these age-old questions, we will keep reinventing the wheel, but that is fine. We want to be sure that we get a round wheel instead of a hexagonal or an oval one.
Yes of course you are correct. I didn't delve into any of those other questions, I think FIRECalc probably answers them as well as they can be. I was just curious if there was any "magical" clearly consistent benefit to various rebalancing bands alone. My conclusion that there was not. Some periods, some bands improved performance, but not by much and not very often. These were times the bands just happened to occur during a market drop and rise, but it is entirely dependent on what time period you pick, just like trying to use various moving averages to time the market.

So I give up on finding any magic, will just rebalance once a year when I make withdrawals. Hey, I really didn't expect to find anything and just found what was expected, you can't beat Mr. Market .
__________________
Merrily, merrily, merrily, merrily,
Life is but a dream.
CaliforniaMan is offline   Reply With Quote
Old 03-24-2016, 06:04 PM   #24
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,431
I am sorry that I was not clear. I was hoping that I could entice you to look at your runs at another facet, to examine the results from a different view, as I am too lazy to do my own work. But I was also raising some ramifications from Bogle's assertion as quoted by another poster, that we should not bother to rebalance at all.

Again, if rebalance does not help, and stocks beat anything else, we should all go 100% equity. Yet, Bogle also says to have some bonds. Why?
__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is offline   Reply With Quote
Old 03-24-2016, 06:49 PM   #25
Full time employment: Posting here.
 
Join Date: Jan 2007
Location: Thousand Oaks
Posts: 839
Quote:
Originally Posted by NW-Bound View Post
I am sorry that I was not clear. I was hoping that I could entice you to look at your runs at another facet, to examine the results from a different view, as I am too lazy to do my own work. But I was also raising some ramifications from Bogle's assertion as quoted by another poster, that we should not bother to rebalance at all.

Again, if rebalance does not help, and stocks beat anything else, we should all go 100% equity. Yet, Bogle also says to have some bonds. Why?

Maybe the idea is that at the start of your withdrawal phase you want some bonds to protect against early volatility -- as time goes on your existing initial allocation of bonds is enough to fulfill that requirement ?


Sent from my iPhone using Early Retirement Forum
__________________
mh is offline   Reply With Quote
Old 03-24-2016, 06:55 PM   #26
Full time employment: Posting here.
CaliforniaMan's Avatar
 
Join Date: Dec 2013
Location: San Diego
Posts: 846
Quote:
Originally Posted by NW-Bound View Post
I am sorry that I was not clear. I was hoping that I could entice you to look at your runs at another facet, to examine the results from a different view, as I am too lazy to do my own work. But I was also raising some ramifications from Bogle's assertion as quoted by another poster, that we should not bother to rebalance at all.

Again, if rebalance does not help, and stocks beat anything else, we should all go 100% equity. Yet, Bogle also says to have some bonds. Why?
Well, you are not the only lazy one here and spring is upon us, so time to be outside in the garden instead of doing spreadsheets . For me the answer as to why not hold 100% stocks during retirement (I did hold 100% stocks during much of my accumulation period) is that we don't live in retirement over the "long term," and there are already tools out there, FIRECalc and others, that show that some bonds can protect us from failure over our "shorter than long term" retirement, even though they do reduce potential gains over that ever illusive "long term."
__________________
Merrily, merrily, merrily, merrily,
Life is but a dream.
CaliforniaMan is offline   Reply With Quote
Old 03-24-2016, 07:03 PM   #27
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,431
Well, I think someone with access to Bogle should ask the guru for clarifications. Bogle occasionally gives conflicting advices, or at least it seems so to me.
__________________

__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Interest Rate Reduction Automatic Call TromboneAl Other topics 7 04-05-2008 06:54 PM
Automatic reinvestment Tiger FIRE and Money 17 12-22-2007 05:30 PM
Automatic payment option for Penfed ( Pentagon Federal ) Visa calmloki FIRE and Money 2 04-20-2007 11:40 AM
Automatic payments from a money market (savings) account a FIRE and Money 4 04-07-2007 01:14 PM
Tranaction fees, Fidelity - Automatic Account Builder discount. Brat FIRE and Money 3 10-17-2006 11:18 AM

 

 
All times are GMT -6. The time now is 03:29 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.