January Reblancers Thread

[TromboneAl]

Who else will be rebalancing on Monday? I'll be moving a big chunk out of equities, mostly because of last year's run up, but also because I'm going to lower my equity allocation from 57% to 54%. I think I'll do it in one transaction (that is, not DCA).

 

[RockyMtn]

I will rebalance Monday as well. Will keep my equity allocation at about 60%. I do not DCA on rebalancing dates. To DCA seems to sort of defeat the purpose of rebalancing IMHO.

Will also fund the TIRA all at once as I prepare to take advantage of the ability to rollover into a Roth IRA in 2010.

 

[Spanky]

We plan to increase our equity allocation from 33% to 50% despite the current run up.

 

[Spanky]

I.. DCA seems to sort of defeat the purpose of rebalancing IMHO.

DCA is a tactic to use when the market seems uncertain.

 

[easysurfer]

I will be rebalancing on Monday. In chunks too rather than DCA.

 

[RunningBum]

Yep, I was close to 3% off, so I scheduled a move within my 401K from international stocks to bonds, as I was also a bit heavy on international vs domestic.

 

[RockyMtn]

DCA is a tactic to use when the market seems uncertain.

DCA is in fact a good strategy, in uncertain as well as certain times. I DCA all year long, just not when I rebalance.

If you DCA with your rebalancing don't you run the risk of never getting rebalanced? I guess you could sell all of your investments that you are going to lighten up on and then DCA into those you are planning to invest in. But then by definition you are not at your optimal AA at some point of the exercise.

 

[RunningBum]

It seems to me that if you want to DCA to get your AA rebalanced, you might as well rebalance monthly or quarterly. I don't understand why you would want to wait a full year and then only slowly get it back into balance.

I do one rebalance yearly, but if I have money to invest during the year because of a bonus, company stock sale, or some other event, I look at my AA and put it where I am light.

 

[audreyh1]

I wait until Jan 15, mainly because I need time to get final 2009 distribution info (won't know until the 5th this year) and calculate estimated taxes and decide on my withdrawal needs for the year.

I'll probably only rebalance if my portfolio is sufficiently out of balance (by 8 to 10%) after all the above. I don't know yet. I already rebalanced in August of 2009 because I reached 10% out of balance. So I'm not that motivated to do it again unless I'm getting close to the range limits.

If I were changing my allocation I would do it in one step, not average it out. I only sometimes use DCA if I am adding new money to my portfolio (which rarely happens).

I think DCA makes sense for folks still accumulating - i.e. people adding to their retirement portfolios. If you are adding new money monthly from your salary, for example, you are already DCAing by default. Also it makes sense if you have a new lump sum to invest.

Audrey

 

[audreyh1]

We plan to increase our equity allocation from 33% to 50% despite the current run up.

Just curious - wouldn't the recent run-up already have increased your equity allocation significantly?

Audrey

 

[WM]

What about rebalancing when there are limits to where I can put the funds?

We're still in the accumulation phase, and this year for the first time I need to work around the fact that I can put a more money into the TSP than our IRAs. But for rebalancing purposes I don't need much more in the TSP funds, I need more in the smaller categories like REIT, emerging markets, etc, which aren't available in the TSP.

What's the best option there? I assume it's better to keep maxing the tax-deferred accounts and accept that I may not quite be able to get/stay with my desired allocation?

 

[Maurice]

I'll do some rebalancing in mid-Feb, since I get most of my pay for the year then. Barring that, I prefer to rebalance when indivdual asset classes get to far off target.

 

[LOL!]

So with everyone rebalancing out of equities next week, I can safely predict that the market will fall.

 

[easysurfer]

With all the money flying back and forth, I'm always amazed at how the fund companies (such as Vanguard) have the account balances up-to-date for online viewing so promptly. I know it's their job, but still pretty amazing.

 

[CyclingInvestor]

With all the money flying back and forth, I'm always amazed at how the fund companies (such as Vanguard) have the account balances up-to-date for online viewing so promptly. I know it's their job, but still pretty amazing.

My last job (in 2006) was writing software to parse the raw data feeds from equity exchanges and their consolidaters (Comstock, Reuters), and test drivers to watch the results. I was always amazed at how I would hit the "trade" button on my Schwab account to execute a trade, and almost instantly (less than 1/4 second) watch the trade cross on the data feed.

 

[kumquat]

I don't know if it's rebalancing per se but I have to exercise a bunch of former mega-corp options in the next six months (before they expire) and will be doing some each month. I may be a DMT during the month

 

[Alan]

I rebalanced a couple of months back when I got out of whack by 5% so I did some selling in my 401(k) and DW's IRA. I'm only out by 0.5% now, so I'm going to skip my normal January rebalance.

 

[Moemg]

I rebalanced today . I am keeping my equity portion at a gutsy 65%.

 

[friar1610]

DCA is a tactic to use when the market seems uncertain.

When is the market not uncertain? If you can tell me that, I can invest better.

 

[Maurice]

I rebalanced today.

I hope mutual fund orders? If they were equities or ETFs I at least hope you put in limit orders, and didn't expose yourself to a market on open two days in advance...

 

[Spanky]

Just curious - wouldn't the recent run-up already have increased your equity allocation significantly?

Audrey

Audrey,

I liquidated quite a bit of equities for tax write-off purpose.

Spanky.

 

[CuppaJoe]

So with everyone rebalancing out of equities next week, I can safely predict that the market will fall.

That's the only reason I'm reading this thread, will it drop on the 4th? I'm holding some powder, so when are most of you all selling equities?

 

[Focus]

I'm going to wait until the end of 2012 (i.e., the end of the next presidential election year), based on Jim Otar's findings in "Unveiling the Retirement Myth":

Rebalancing too often compounded losses in secular bear markets. The real benefit of synchronizing the rebalancing activity with the U.S. Presidential election cycle was a significant improvement in preserving capital.

I don't think we're in a bear market anymore, but this technique seems to work best in any scenario. I used to rebalance too often -- whenever my investments shifted 5% from my target ratio. Like Otar points out, that did me no favors as the market went down. It would have been better to let the trend ride out. Yet another lesson learned.

 

[easysurfer]

When I rebalanced, I rebalanced both within and outside my IRA account. I always feel a bit nervous like I'm going to inadvertantly transfer a chuck on money outside or into an IRA by mistake (don't know if safeguards are in place to prevent this). Well, looking at my transactions on Monday, I did make a mistake, but luckily, it was only that I transfered a chunk to my Total Bond Market IRA (which had a zero balance) instead of my Total Bond Market Admiral IRA. At least they were both IRAs.

 

[audreyh1]

Any comments from the early January rebalancers after the fact?

I'm still figuring......

Audrey