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I just rebalanced
Old 05-07-2013, 06:14 PM   #1
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I just rebalanced

I just rebalanced to my nominal 50/50 (age 62) and I must say it was the hardest one I've done yet. I use a 10% AA band ( equities can bounce between 45% to 55% before I do any buying or selling) and I've been hovering at the 55% plus a simdgen sort of level for quite a while now. I just could not get motivated to rebalance since every guru (I guess with the exception of Bogle) keeps going over the bond bubble litany and the drip drip drip chinese torture treatment obviously got to me.

I finally decided enough is enough and have done it! Jubilation! With my uncanny timing ability this means the stock market will continue to zoom up like a rocket ship.
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Old 05-07-2013, 08:19 PM   #2
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I unloaded a quarter of one major position yesterday and sold covered calls on parts of three positions today, Just a function of nearing my valuation targets, although a rising market certainly helped.
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Old 05-07-2013, 08:39 PM   #3
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Originally Posted by ejman View Post
I just rebalanced to my nominal 50/50 (age 62) and I must say it was the hardest one I've done yet. I use a 10% AA band ( equities can bounce between 45% to 55% before I do any buying or selling) and I've been hovering at the 55% plus a simdgen sort of level for quite a while now. I just could not get motivated to rebalance since every guru (I guess with the exception of Bogle) keeps going over the bond bubble litany and the drip drip drip chinese torture treatment obviously got to me.

I finally decided enough is enough and have done it! Jubilation! With my uncanny timing ability this means the stock market will continue to zoom up like a rocket ship.
Thank you for helping the stock market make a new higher high.
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Old 05-07-2013, 09:19 PM   #4
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Thank you for helping the stock market make a new higher high.
No problem. a minuscule 1% fee on all gains would be much appreciated. Don't call me if it drops though
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Old 05-07-2013, 09:23 PM   #5
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I just rebalanced to my nominal 50/50 (age 62) and I must say it was the hardest one I've done yet. I use a 10% AA band ( equities can bounce between 45% to 55% before I do any buying or selling) and I've been hovering at the 55% plus a simdgen sort of level for quite a while now. I just could not get motivated to rebalance since every guru (I guess with the exception of Bogle) keeps going over the bond bubble litany and the drip drip drip chinese torture treatment obviously got to me.

I finally decided enough is enough and have done it! Jubilation! With my uncanny timing ability this means the stock market will continue to zoom up like a rocket ship.
I'm going to take some off the table also, but I'm with you on the reluctance to put the money into bonds. Only short term for me. I just think long term bonds are akin to tech stocks of 2000 right now.
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Old 05-07-2013, 09:25 PM   #6
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I unloaded a quarter of one major position yesterday and sold covered calls on parts of three positions today, Just a function of nearing my valuation targets, although a rising market certainly helped.
I would think reaching valuation targets is akin to rebalancing targets and both fall under the heading of following a pre set investment methodology instead of the prevailing winds at the moment. Still hard to do. Particularly with all the noise so prevalent now.
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Old 05-07-2013, 09:47 PM   #7
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I would think reaching valuation targets is akin to rebalancing targets and both fall under the heading of following a pre set investment methodology instead of the prevailing winds at the moment. Still hard to do. Particularly with all the noise so prevalent now.
Its a little different. I have individual securities which are generally swing for the fences type names. For each of these I generally have a pretty specific idea of what they are worth and when they get there I start selling via outright sales, covered calls, or occasionally a collar. I do my selling regardless of where my portfolio is compared to my allocations. If I need equities to get back to my target allocation, I either buy other individual names I like or an appropriate index ETF. If I need fixed income, the proceeds either go into cash, CDs or a bond ETF. Allocation fixes are different from my valuation-based sell discipline on individual stocks and bonds.

My last sale just went into cash since I am within spitting distance of my target equity allocation after the sale.
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Old 05-07-2013, 10:00 PM   #8
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Its a little different. I have individual securities which are generally swing for the fences type names. For each of these I generally have a pretty specific idea of what they are worth and when they get there I start selling via outright sales, covered calls, or occasionally a collar. I do my selling regardless of where my portfolio is compared to my allocations. If I need equities to get back to my target allocation, I either buy other individual names I like or an appropriate index ETF. If I need fixed income, the proceeds either go into cash, CDs or a bond ETF. Allocation fixes are different from my valuation-based sell discipline on individual stocks and bonds.

My last sale just went into cash since I am within spitting distance of my target equity allocation after the sale.
I see. Far, far more sophisticated. Thank you for the clarification. At this stage of my life I'm searching for simplicity but I can certainly see that you are obviously having fun and (I presume) great results. Just curious. If you buy a bond ETF where would that money go?
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Old 05-07-2013, 10:06 PM   #9
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I see. Far, far more sophisticated. Thank you for the clarification. At this stage of my life I'm searching for simplicity but I can certainly see that you are obviously having fun and (I presume) great results. Just curious. If you buy a bond ETF where would that money go?
Since I am staring down the barrel of ESR I am working on deconcentrating my portfolio and swapping individual names for broad indices. But I will always have some portion of m assets in individual stocks and (especially) bonds.

Much of my fixed income allocation is in cash, I bonds and CDs, since I do not like what I see in the bond markets. However, I have bought a healthy chunk of WIW, a closed end bond fund with no leverage and trading at a fat discount.
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Old 05-07-2013, 10:16 PM   #10
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Since I am staring down the barrel of ESR I am working on deconcentrating my portfolio and swapping individual names for broad indices. But I will always have some portion of m assets in individual stocks and (especially) bonds.

Much of my fixed income allocation is in cash, I bonds and CDs, since I do not like what I see in the bond markets. However, I have bought a healthy chunk of WIW, a closed end bond fund with no leverage and trading at a fat discount.
Thanks. I see very flat performance in the Google chart but I guess that makes sense since inflation has been muted.
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Old 05-07-2013, 10:24 PM   #11
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Thanks. I see very flat performance in the Google chart but I guess that makes sense since inflation has been muted.
WIW is mostly a pile of TIPS, which are currently out of favor. However, my interest is mostly due to the specific strategy I follow with fixed income CEFs (details here Life, Investments & Everything: How to Buy a Dollar For 90 Cents ) and WIW is currently the only CEF that passes my screening criteria.
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Old 05-07-2013, 10:40 PM   #12
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I just rebalanced to my nominal 50/50 (age 62) and I must say it was the hardest one I've done yet. I use a 10% AA band ( equities can bounce between 45% to 55% before I do any buying or selling) and I've been hovering at the 55% plus a simdgen sort of level for quite a while now. I just could not get motivated to rebalance since every guru (I guess with the exception of Bogle) keeps going over the bond bubble litany and the drip drip drip chinese torture treatment obviously got to me.

I finally decided enough is enough and have done it! Jubilation! With my uncanny timing ability this means the stock market will continue to zoom up like a rocket ship.
After many years of having a 55/45 AA, I, too, have been gradually rebalancing toward a 50/50 AA (only in my IRA). Recent large gains in the stock market along with this change due simply to my aging (I just turned 50) were the causes.

I don't make frequent rebalancing adjustments to my taxable accounts because I need them to generate the income needed to cover my expenses. Also, rebalancing would be a taxable event so it would be a less "clean" rebalancing. Back in 2010 the NAVs of my stock funds and bond funds were heading in opposite directions which made it more obvious to rebalancing.
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Old 05-08-2013, 12:21 AM   #13
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After many years of having a 55/45 AA, I, too, have been gradually rebalancing toward a 50/50 AA (only in my IRA). Recent large gains in the stock market along with this change due simply to my aging (I just turned 50) were the causes.

I don't make frequent rebalancing adjustments to my taxable accounts because I need them to generate the income needed to cover my expenses. Also, rebalancing would be a taxable event so it would be a less "clean" rebalancing. Back in 2010 the NAVs of my stock funds and bond funds were heading in opposite directions which made it more obvious to rebalancing.
Rebalancing to a more age "comfortable" AA makes sense but I have to admit that I didn't follow my own advice when I ER'd back in 2002 (age 52) as I was close to a 70/30 allocation back then. I got lucky as the market went up 2003-2007 and I got religion in 2007 and ratcheted down to 60/40 and subsequently to 55/45. It was just plain luck. I think that we in the ER community tend to congratulate ourselves for some good traits (LBYM, low cost investing, discipline etc) But for a lot of us good luck plays a major role as well.
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Old 05-08-2013, 06:59 AM   #14
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Rebalancing to a more age "comfortable" AA makes sense but I have to admit that I didn't follow my own advice when I ER'd back in 2002 (age 52) as I was close to a 70/30 allocation back then. I got lucky as the market went up 2003-2007 and I got religion in 2007 and ratcheted down to 60/40 and subsequently to 55/45. It was just plain luck. I think that we in the ER community tend to congratulate ourselves for some good traits (LBYM, low cost investing, discipline etc) But for a lot of us good luck plays a major role as well.
But most of us by LBYM, low cost investing, discipline, etc "make" some of our "luck"
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Old 05-08-2013, 08:12 AM   #15
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Far, far more sophisticated. Thank you for the clarification. At this stage of my life I'm searching for simplicity but I can certainly see that you are obviously having fun
+1. I'm more of a KISS person.
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Old 05-09-2013, 11:32 PM   #16
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ejman - Thanks for posting this topic.

It helped motivate me to go and do a rebalance. My target AA is 60/40, with rebal points at 55 and 65. The equities had increased to the upper trip point of 65, and I just wasn't doing anything yet. So I did it for May 8th, transferred to a MM, just couldn't force myself (yet) this time to put it into bonds.

But I really should look into a short-term bond fund in my IRA which has an average duration of 1.6 years, and figure out how an interest rate increase of X percent would affect it, versus my intermediate-term bond fund which I have been in for years, which has only an average duration of 2.9 years, on the short end of intermediate.

Someday, interest rates will start to go up (starting to wonder if that will still be many years away), but in the meantime, a bond fund will generate some return, versus the zero of a MM.
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Old 05-09-2013, 11:42 PM   #17
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Rebalancing is not necessarily easy. I did it myself on Monday.

My heart and my gut screamed "ride these gains". But my IPS said it was time to rebalance into bonds. Ive pulled the trigger, and yeah the market has been up since then. But as a hardcore boglehead, it needed to be done.

Stay the course.
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Old 05-10-2013, 09:39 AM   #18
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Telly, for the last few years I've followed the short term bond fund instead of MM route myself (Vanguards Short term Investment Grade) I see that the duration in that fund is similar to the one in you intermediate bond fund. As some people have pointed out there is a safer alternative in the form of a CD ladder. I decided not to follow that route because I think that the current environment reflects forces far stronger than just the US situation and that as a result the low interest rate environment will last a long while and unwind slowly. But of course, it could be completely the opposite.
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Old 05-10-2013, 10:02 AM   #19
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I was approaching the need to rebalance when the disbursements from a couple of inheritances started to come in. Now I find myself cash-heavy. But is there any reason to buy gold or bonds at the moment?
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Old 05-11-2013, 04:40 PM   #20
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My bond fund allocation is now 6.2% below target, and 8% is the trigger. Bonds sold off a little last week, and it probably won't take much more to trigger a rebalance even if the stock market doesn't rise much more. Maybe if the 10-year backs up above 2% again will be enough.

We'll see........otherwise sitting on my hands.
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