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View Poll Results: How do you know your asset allocation?
Use M* Portfolio or Instant X-ray 21 21.65%
Use mostly index funds, so use the fund names 7 7.22%
Use Quicken, MSMoney, or a spreadsheet 44 45.36%
Some other way, explain if you wish 20 20.62%
I don't know my AA 5 5.15%
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Old 02-26-2010, 01:20 PM   #41
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I use Vanguard's Portfolio analyzer every few months !
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Old 02-26-2010, 01:28 PM   #42
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I use Vanguard's Portfolio analyzer every few months !
Me too.

And I used to run FIREcalc all the time because it made me feel rich, not that I trusted it. But I also have never read Four Pillars or any of the other literature.
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Old 02-26-2010, 03:41 PM   #43
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I use both the Schwab Portfolio and Vanguards, although I'm not particularly anal about it.

I do use FIRECalc also but I have to say that I haven't run during the downturn as much as I use to.
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Old 02-26-2010, 04:04 PM   #44
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A second, related question (for all who post):

After you analyze the allocation, how far off the percentages do you need to be to take action?

Unless I am off by 10% or more I am not making too many bold moves (and by time my allocation is off 10% it means that I stopped paying attention for 6-12 months). I usually can adjust contributions before that.
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Old 02-26-2010, 04:11 PM   #45
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A second, related question (for all who post):

After you analyze the allocation, how far off the percentages do you need to be to take action?

Unless I am off by 10% or more I am not making too many bold moves (and by time my allocation is off 10% it means that I stopped paying attention for 6-12 months). I usually can adjust contributions before that.
If I am 5% off target I will re-balance, and this is the only time other than the annual check-up that I look at allocations to foreign stocks and bonds. IOW I don't monitor the allocation between small cap / large cap etc very often.
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Old 02-26-2010, 04:43 PM   #46
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A second, related question (for all who post):

After you analyze the allocation, how far off the percentages do you need to be to take action?

...I usually can adjust contributions before that.
Boundary conditions:
Target AA and lower bound = 40/60
Upper bound for AA = 50/50
IOW 40% minimum, 50% maximum for equities allocation
Adaptive algorithm:
Redirect of monthly DCA used to rebalance in conjunction with usual market fluctuations. Reviewed quarterly. Exchanges/sales are used very rarely, and only for elimination of higher expense ratio funds.
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Old 02-26-2010, 05:15 PM   #47
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Rebalance when overall target allocation (stocks to bonds) is off by 5% or more. To determine which asset classes to allocate from/to, I use a rule that looks at a specific % deviation from the asset allocation percentage. So:

30% allocation to Large Cap 5%+/- deviation
10% allocation to Small Cap 25%+/- deviation
5% allocation to Real Estate 25%+/- deviation
15% allocation to International Stock 25% +/- deviation
Fixed Income 25%+/- deviation
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Old 02-26-2010, 05:26 PM   #48
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I might be expelled with you although I have read the Four Pillars and can think of at least two of them. But...

My name is Yakers and I am a RE addict who has never run FIRECALC.

There, I feel better.
Oh, thank you so much for admitting to this. I feel better now that I know that I am not the only one.

I actually read the Preface and Introduction of The Four Pillars today. I think that I had this book confused with The Intelligent Asset Allocator, which I know would be totally over my head. He stated in the Preface that most of the readers of The Intelligent Asset Allocator were scientists, engineers, or finance professionals. I know that there are quite a few people on this forum who had or still have these careers. I am definitely not as smart as all of you. He states that The Four Pillars allowed him to write a book about investing for the general audience. I think that I might actually enjoy reading it now. By the way, the four pillars are, Theory, History, Psychology and Business. I hope that it helps me in asset allocation. Hopefully, after I read it, I am going to go back to the thread that LOL had on AA and read some of the links he listed and try to work through it according to his plan and homework assignments. (I briefly skimmed it today.)
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Old 02-26-2010, 05:33 PM   #49
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I use Vanguard Portfolio Watch and believe it to be accurate.
Yep - the few DRIP stocks not in VG broker account don't alter my percents much.

heh heh heh - unless one takes off like the Dell of the 21st century or something -one can hope. But I've given up buying Powerball tickets when I gas the car. .
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Old 02-26-2010, 08:54 PM   #50
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+1 for the spreadsheet system. I update monthly when it is time to allocate new money.

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Old 02-27-2010, 10:03 AM   #51
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Originally Posted by Gotadimple View Post
Rebalance when overall target allocation (stocks to bonds) is off by 5% or more. To determine which asset classes to allocate from/to, I use a rule that looks at a specific % deviation from the asset allocation percentage. So:

30% allocation to Large Cap 5%+/- deviation
10% allocation to Small Cap 25%+/- deviation
5% allocation to Real Estate 25%+/- deviation
15% allocation to International Stock 25% +/- deviation
Fixed Income 25%+/- deviation
Can you give an example- It sounds like a 25% deviation from 10% is 12.5%??

Thx!
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Old 02-28-2010, 12:01 AM   #52
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Can you give an example- It sounds like a 25% deviation from 10% is 12.5%??

Thx!
That's correct. At 12.5%, I would rebalance to another asset class that was below the minimum.

Rita
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Old 02-28-2010, 03:43 PM   #53
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You gotta decide what is the maximum % you can stand to lose, that determines your Asset Allocation.
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Old 02-28-2010, 05:21 PM   #54
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That's correct. At 12.5%, I would rebalance to another asset class that was below the minimum.

Rita
Is the logic you do not let more volatile asset classes move one way or other, but with less volatile classes, you let them go more?

curious why different classes have different percentages off.
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Old 02-28-2010, 05:33 PM   #55
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What has been described is Larry Swedroe's 5/25 rebalancing bands. Basically, rebalance whenever an asset class goes out of balance by 25% of its weight or 5% of total portfolio value whichever is smaller. So for all asset classes at 20% and more of total portfolio value, this rule limits the band to plus or minus 5% of total assets. For all asset classes less than 20% of total portfolio value, this rule limits the band to plus or minus 25% of that asset class's weight.
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Old 02-28-2010, 09:28 PM   #56
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You gotta decide what is the maximum % you can stand to lose, that determines your Asset Allocation.
It's the only thing likely to work. If the experience of the last two years means anything, it means that when things go bad, almost everything goes bad. There is no hiding, except in issues with US government backing and short durations. Possibly Swiss or German or even British sovereign debt may be fine, for those who buy groceries with Euros or SWF or British pounds.

Long term bonds may or may not rise in price. During the recent crash they did. But it doesn't have to happen that way, and the next stress might be caused by foreigners laying off buying US government debt and LT interest rates rising. Ben may find some limit to quantitative easing.

Ha
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Old 03-01-2010, 12:50 PM   #57
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Manual spreadsheet, coarse allocations (I count my Hi-Yield fund as 50% stock 50% Bond). Rarely look at it, maybe a couple times a year if the market has changed and I'm thinking maybe I should re-balance.

I'd be more attentive to this, but when I run FireCalc, I don't see any great sensitivity long term as to whether your AA is 75/25, 70/30, 65/35... or 50/50. I figure I've got about the same chance of re-balancing to what will prove to be the wrong direction as I do the right direction. So I don't much bother.

Analysis Paralysis? Lazy? Astute? All or none of the above?

-ERD50
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Old 04-07-2010, 03:38 PM   #58
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I'd be more attentive to this, but when I run FireCalc, I don't see any great sensitivity long term as to whether your AA is 75/25, 70/30, 65/35... or 50/50. I figure I've got about the same chance of re-balancing to what will prove to be the wrong direction as I do the right direction. So I don't much bother.

Analysis Paralysis? Lazy? Astute? All or none of the above?

-ERD50
I don't pay much attention either although I did go a little more conservative a few years back to free up a few years of anticipated income in cash equivalents. I don't bother running the Firecalc checks, I rely on you and others to tell me the answers You have convinced me that my laziness is a virtue.
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Old 04-07-2010, 03:48 PM   #59
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You gotta decide what is the maximum % you can stand to lose, that determines your Asset Allocation.

Yes, that's what they day. After all the studies and allocation models the rule of thumb is to use an allocation that you feel comfortable with

Is asset allocation science, art or psychology? A little of each...I suppose.
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Old 04-07-2010, 09:02 PM   #60
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You gotta decide what is the maximum % you can stand to lose, that determines your Asset Allocation.
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Yes, that's what they say. After all the studies and allocation models the rule of thumb is to use an allocation that you feel comfortable with
Yes, but then we run into different ways to 'lose'. Get too conservative and you might not lose to a market downturn, but you might lose to inflation. So that may not be an answer either. Oh well, no one said this was gonna be easy!

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You have convinced me that my laziness is a virtue.
Well, it sounds better if you refer to our laziness as being 'pragmatic' But, same thing.

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