Have you ever cringed at the thought of selling a winner?

[Brat]

In May 02 I purchased equal amounts of Oakmark Balanced and Dodge & Cox Balanced because they don't have a lot of overlap in equity, creating my own 2002 target retirement portfolio. Oakmark has performed as I expected from the both of them, nice modest steady returns. Dodge & Cox has been on a tear, and behaving like (forgive me folks) a bucket 3 investment.

So should I change my investment goal for DODBX and enjoy the ride, or should I rebalance?

[LOL!]

I own DODBX as well. My spouse has had OAKBX in her 401(k).

Now others know what kind of astute investors we are. Was there another point to these posts?

[Nords]

Quote:

Originally Posted by Brat So should I change my investment goal for DODBX and enjoy the ride, or should I rebalance?

You should rebalance... the question is when. How far out of whack are you willing to go?

[ats5g]

Quote:

Originally Posted by Brat In May 02 I purchased equal amounts of Oakmark Balanced and Dodge & Cox Balanced because they don't have a lot of overlap in equity, creating my own 2002 target retirement portfolio. Oakmark has performed as I expected from the both of them, nice modest steady returns. Dodge & Cox has been on a tear, and behaving like (forgive me folks) a bucket 3 investment. So should I change my investment goal for DODBX and enjoy the ride, or should I rebalance?

Brat,

How far off your 50/50 DODBX/OAKBX allocation are you? By my rudimentary calculations, is you put equal amounts in each, you should be roughly 51% DODBX and 49% OAKBX. Are you way off?

- Alec

[Nords]

Quote:

Originally Posted by ats5g How far off your 50/50 DODBX/OAKBX allocation are you? By my rudimentary calculations, is you put equal amounts in each, you should be roughly 51% DODBX and 49% OAKBX. Are you way off?

We frequently see calculations & data like this that overlook the reinvestment of dividend & cap gains distributions...

[Brat]

There was nothing astute about my decision, I just read the Forbes report on mutual funds and researched the top two balanced funds with good ratings in up and (most importantly) down markets. Saw that they didn't overlap much and thought I would follow Mom's advice to not spend all my money in one place. Just luck.

How much to get out of balance... that is the question. Our IRA investments as a total just chugged along, really boring, since 2002. I rebalance maybe twice a year, May and January. This is the only fund that hasn't performed as expected (not that I'm complaining).

What I think is happening is that DODBX's equity investment style is in enjoying huge returns at the moment (notice that Fid Low Price which has languished for a while is also picking up). I am pondering graphing this investment's value in our portfolio daily and if the slope starts to decrease over a couple weeks (reflecting a change in market sentiment) carve off a chunk.

Alex, oh yess. 100=145 oakbx, 100=255 dodbx, including reinvestment of dividends & cap gains. I am looking at total return.

[ats5g]

C'mon Nords, give me some credit.

I used the return #'s from M* for DODBX and OAKBX that include reinvesment of cap gains + dividends.

OAKBX

2002 -2.97 [only includes Q3 + Q4]
2003 23.20
2004 10.40
2005 8.60
2006 6.00 [ytd]

DODBX

2002 -3.19 [only includes Q3 + Q4]]
2003 24.40
2004 13.30
2005 6.60
2006 8.50 [ytd]

The returns for both funds for Q2 in 2002 are also very similar, so I can't see how Brat's returns are so far off. But hey, the real money doesn't lie, so I'll bow out. [perhaps I just got a little too spreadsheet happy]

- Alec

[d]

i cringe every time i buy and every time i sell ... and if i fail to buy or sell i usually cringe at some later date. but it's not about not cringing. (to minimize the cringe, i generally rebalance often, in relatively small amounts, within my tax advantaged accounts.)

[Brat]

Frankly I was stunned at the difference. I looked back to assure myself that they were out of the gate at the same time and in the same amount.

Plan: sell enough of DODBX to bring them close to =, fill up my CD bucket and spend the rest on an international fund. In the end I have the same % fixed income and equity, just different types.

[audreyh1]

No, when I rebalance (which means selling some winners) I don't cringe. Rather I experience relief because I got to realize some of those gains. If I have an asset class that way outperforms others I'm always afraid it's going to have a big correction before I get to take advantage of the realized gains.

And boy did that happen this May - some high-flier international funds got hit big time. Good thing I had rebalanced in late April.

Besides, there is a BIG difference between trimming a winner and selling it all. You still get to watch it run, you just handicapped it a little bit.

REITs are another good example. What a run! I have trimmed for many years now, but they have kept outperforming! Some people anticipated a correction early this year (or last year, or even the year before) and more than just trim, they actually cut their allocation in half or even just sold all. That turned out to be a poor decision. You just can't time these things!

Audrey

[Nords]

Quote:

Originally Posted by ats5g C'mon Nords, give me some credit.

Sorry, I tried to phrase that in the most tactful "Beardstown Ladies" way that I knew how. No offense intended!

[youbet]

Quote:

Originally Posted by Brat So should I change my investment goal for DODBX and enjoy the ride, or should I rebalance?

No rebalancing. But perhaps a little dribbling or sloshing from one bucket to another would be in order.

If your portfolio has done well and the buckets are getting heavy, don't try to lift them when pouring one to the other. Use a piece of hose and siphon that money around.

[mathjak107]

At the height of the energy and emerging markets boom my newsletter sold out 1/2 our positions. im like oooh man they are crazy what are they doing,they are killing some of the geese that are laying golden eggs.

but being a long time subscriber i made the adjustment.

Once again im soooooo thankful i listened and took that money out of there.

We forget its buy low sell high... our tendancey is to hang in so long we start to ride things back down.

[LOL!]

Quote:

Originally Posted by Brat TAlex, oh yess. 100=145 oakbx, 100=255 dodbx, including reinvestment of dividends & cap gains. I am looking at total return.

Below is a graph of total return comparing DODBX and OAKBX. The total return of these funds track each other quite well. There is something fishy going on here. Or I am missing a way to goose the return of my DODBX.

[Brat]

I just looked at purchases. Last night I found shares that were transferred from another account custodian - DODBX holdings were juiced without my noticing.

That's what I get when I fell in love with a fund, buy at more than one shop at widely separate times, looking at fund allocation almost never. I would just click on the Fid analysis box to see if I had some of each asset type, check the allocation of fixed income vs. equity, and be a happy investor. To my astonishment DODBX is almost 40% of our $. As good as they are, that isn't wise.

For better or worse, Lucia got me actually looking at my funds and thinking about how we should spend down. Before I believed that having a lot of very good balanced funds was the smart and easy thing to do. Now I think that I should use balanced funds for "bucket 2", reducing that holding as "bucket 1" needs filling. Using the Lucia theory I am way under funding my long term investments, which I had regarded as 'fun money' because of high StD. I can afford to invest in higher risk/reward funds if I protect myself by really managing cash equiv investments in "bucket 1'.

I still cringe at the thought of selling off some of DODBX, but need to do it.

[kcowan]

Quote:

Originally Posted by Brat ... I still cringe at the thought of selling off some of DODBX, but need to do it.

Always sell when it is a good deal for your buyer. That way you will not get greedy and be trying for the TOP all the time.