Normally I don't ask for advice but

[SVHoper]

Hi,

I appreciate your pain. Your pain is magnified because you want to make a sizable adjustment to your asset allocation, which accounts for the dissonance. ie if your asset allocation was already in place... your rule may be saying sell stock just like you "feel" you want to.

I don't believe I can market time because not only do I have to pick a general direction for the market... I have to pick the size of the move and I have to pick exit and entry points.... ie repeatedly pick the direction, size and timing ... which I know I cannot do. Therefore in a sideways market, there are a lot of coulda, woulda opportunites... I just have to be remind myself that there is no way I coulda sold at those relative tops and bought at those relative bottoms and be happy that at least I had no inclination to sell at the bottoms... and buying near bottoms did help a bit.

If you are adding new money... it may make it a bit easier as you can delay the buying for a relative dip.

Otherwise I am not sure there is a neat rule of thumb that applies... for how to change an asset allocation. It is kind of like lump sum where on average (market rises about 2/3 time) so all in works on average... but for a lot of the time the market is not rising, so dollar cost averaging over 12 months is better (and also better for peace of mind). Perhaps you might be happy to adjust your asset allocation over 12 months

 

[Dawg52]

And I will be yelling "WHEE!!!!! Wheee!!! wheee! wheee" the whole time, until I am hoarse and then lose my voice, falling into a giddy little heap...

Why can't you give us a little heads up before the market close? I haven't done the head banging thing in awhile. Felt good.

Here is what I did about 5 years ago. Pick the asset allocation you would like and invest it all in a Target Retirement Fund. I never have to think about my portfolio again. My best moves over the last 20 years have been to do nothing.

Now, I truly have nothing to do.

So......what do you do all day? I'm probably going to do the target or balanced fund approach one day. But the hormones just won't let me do it right now.

 

[LOL!]

So......what do you do all day? I

Apparently, these folks with TR funds just run FIRECalc all day every day:
http://www.early-retirement.org/forums/f28/firecalc-not-the-whole-picture-62643.html

 

[target2019]

My "problem" is I have 37% in equities and 63% in fixed income. I want my AA to be 50/50. I want to take some profits off the table - Vanguard TSMI up 23% in almost 2.5 years and the Vanguard REIT up 27% in just 54 weeks but I don't want to rebalance because I want my equity allocation higher. If I exchange from either of these 2 funds I am locked out from repurchasing them for 60 days.

So I (oh boy here it comes!) think we have topped out (see the bold above) and are due for a pull back and would like to take the profit and then get back in after a pullback but the 60 day restriction may well prevent that.

I am not retired, maybe three years from partial, So take this in stride.

This is where we are with US Total Stock Market. You could make a case to stay fully invested, and come to think of it, you could make a case as you've done that we have topped out. My personal opinion is that the run continues.

If you want an idea of the effort and attention needed to find the pullback and get back in, take a look of my real-time study of what that could mean. It can take a bit of time to monitor your indicators.

Rather than exiting your total position in TSM, why not back out 10-20%, and see what comes next? You could put that 10-20% into S&P500 or cash or whatever.

 

[ducky911]

well yesterday morning I was looking for W2R's indicator and well i was getting a bit tired of holding my breath...than i thought maybe she had a power outage or didn't pay her cable bill......so I have had some planned moves that i been looking to do so I opted to do the sell portions of the moves. whee! maybe we will see...but not bad.

 

[NW-Bound]

Do not trust the Wheee... just enjoy the Wheee!!

+1. Eloquently put...but I'm no market-timer.

-1

No, I do not trust the Wh***. No, I do not enjoy the Wh***, because I still have nothing to Wh*** about. I am still below the personal high mark in April of 2011. What holding me back are my foreign ADRs, ETFs, and MFs. I also have material stocks and emerging market ETFs. These have not been doing well for the last 12 months relative to my US equities.

No, no Wh***.

 

[photoguy]

Buying ETFs is just like buying a stock and is relatively simple. You could have someone walk you through the process (maybe there's a tutorial online) of putting in a limit order in 5 minutes. At Vanguard, you can trade their ETFs for free.

Regarding market timing, I think you need to consider how likely you are to be correct about your predictions. For example, last year (2011) between July and October was the perfect time to do as you are suggesting now. The market went through a 22% drop which would have yielded a tremendous amount of profit. If you didn't foresee this drop then and time it right, what makes you think you can do this in the next 6 months?

I guess my bigger question is why do you want to increase your equity portion of your AA to 50%? Do you need to take extra risk to meet your financial goals?

 

[Lsbcal]

I simply set my equity allocation and then when it pops above this by 1%, I sell that 1% to rebalance. Have a model of this process going back decades. It shows that I can expect to sell equities about 23% of the months or maybe 4 times per year.

Monday I'll be selling my 1%.

BTW, am almost all in ETF's. Vanguard brokerage will do the trading for you and you can watch the stuff on the screen (to see bid/ask quotes) so that would be a way to learn. Just buy at the ask and sell at the bid with a limit order. Really quite easy even for 6 figure sums (in liquid ETF's with low bid-ask spreads).

Let's face it, nobody knows where the market is going -- up or down.

 

[veremchuka]

Oh so much to say! I hope people that added their comments return to read this. Also I do thank everyone for your input. Some people have drawn incorrect conclusions because I failed to explain what I want to do and why I want to do it.

I want to take profits off the table not move entirely out of equities. When the market pulls back, and it may I think it will sometime soon, then I'll put the profits back into the equity funds I took them out of. I'm not greedy, I'm not try to time the top and guess the bottom, I'd be pleased to put the profits back in at say 1325 on the S&P 500. Yes I know this is market timing and I admit I am not any better than any of you at it and typically don't try to do it. We have been stuck in a trading range and we are bumping back up against the top of it again. It could go up but with so many uncertainties effecting the economy and market (I know there are always uncertainties effecting the economy and market), I see this as another run down to 1300 or 1325 on the S&P 500. I may be wrong but I don't think I am. Trading range for now, after the election I believe we'll go up or down entirely dependent upon who wins... nuff said about that I don't want this locked.

I hear the many comments about select an AA and just go with that and I'd agree but to do it I need to buy equities. Here's why doing that is painful. I think it was April 10 or 12, 2010 and I decided to do just that and follow the BH people that say this. So I bought TSIM and TISMI. For over 1 year the TSMI was under water presenting many excellent buying opportunities. Today I am still under water on the TISMI purchase. So just rebalancing to the 50/50 AA is not so attractive when the DJIA and S&P 500 are within a few points of a 4.5 year high and I may point out the highest high since the great recession began. So IMHO this is NOT a good time to be buying equities. Once burned, twice shy.

I listened to Larry Kudlow's radio show today and Dougie Kass was his guest. If Dougie is correct we are in for a world of hurt and you'd better get very conservative not just take some profits!

I'll reread all your comments again.

I'm not quite sure I understand what you want to do.

You want to sell equities now because you think the run-up is flagging, but you want to buy equities now because you want to be at 50:50? Is that what you want? If so, you cannot do that.

I exchanged from S&P500 to bonds recently. I certainly am poorer than if I did not do that.

Yes, I know, I want to turn left and right at the same time! What I want is a higher equity allocation but 1st I want to take the profits off the table and move them back in after a pull back and add to equities to get them back up to 50%.

ETFs trade like stocks. If you have a brokerage account, you can buy/sell ETFs like you would any stock.

It is not that easy. With mutual funds you buy/sell at the close based upon the nav that of course we don't know until it all settles out. ETFs are purchased in real time. While using Vanguard ETFs incurs no cost to do this, at what price am I selling or buying? That is what I don't understand - how to do this at some point in time. VG brokerage is pitiful to talk to vs the mutual fund people. The brokerage people always act like they are doing me a favor to talk to me further adding to my uncertainty of using ETFs.

And I will be yelling "WHEE!!!!! Wheee!!! wheee! wheee" the whole time, until I am hoarse and then lose my voice, falling into a giddy little heap...

Do not trust the Wheee... just enjoy the Wheee!!

You're kidding, right?

OH NO not whee!! Now the market will crash for sure!

 

[LOL!]

As I read your last post, I am thinking: This guy is market timing pure and simple. You have got to buckle down and just lose money. That's the only way past this.

Since international equities have been doing poorly with respect to US equities, maybe you can simple sell your US equities and buy international equities? TSM -> TISM. That would be a rebalancing move. Nobody can tell you anything otherwise. Is it a good price? Who knows, but that's what other people are trading it at. Will it go up or down? Who knows? Nobody can predict the future.

The quoted price of an ETF share is the price that you should be willing to sell or buy at because that's the price that everybody else values it at. That's the same as the end-of-day NAV of a mutual fund share.

You need to find solace in an asset allocation and rebalancing. There is really no other way. The point made previously: Why didn't you buy more last year when there was ample opportunity to do so?

In a pinch, you can use the "LOL!'s market timing newsletter" thread to make buy decisions. I wouldn't use that thread to make sell decisions though.

 

[NW-Bound]

Veremchuka, I guess what you are saying is that you want to bring your equity AA up, but are afraid that this is not the time to re-adjust. I guess selecting an entry point is difficult, compared to what one has to do once he is already in and merely has to rebalance.

Being a slicer-and-dicer, I always see sectors or markets that underperform relative to others. My problem is trying not to keep pouring money into the weaker sectors and end up having too much of the losers that may take forever to catch up, if ever.

Yep, investing is not easy. Hence I can see why people just chose much simpler approaches. I like to look at individual components and try to understand their relative movements. They say if you look at what goes into a sausage, you may not want to eat it. Using that as an analogy, I am one who likes to make his own sausage and to vary the ingredients too.

PS. Perhaps the way to do it is not in one fell-swoop but to spread it out. That way, you will never be 100% wrong nor 100% right, but always 50% right. Mentally and psychologically, that kind of thinking helps me.

 

[easysurfer]

Veremchuka,

I re-read your original post. You mentioned that you have 37% equities, 65% fixed income and want to be allocated 50/50. So instead of selling equities to take profits because that's at an all-time high, wouldn't you instead want to sell fixed income and buy equities to get the allocation to 50/50?

IMO, it's more important to get the portfolio to proper allocations, then to ask is it a good time to be in the market or not.

 

[veremchuka]

Since international equities have been doing poorly with respect to US equities, maybe you can simple sell your US equities and buy international equities? TSM -> TISM. That would be a rebalancing move.

Yes, I have considered this as a rebalancing option. It is hard to buy poor performing assets! Rebalancing is not easy, it is something I have never done. When I worked I just poured money into equity funds and it wasn't until a few years before retiring that I had a more balanced AA. My employer hired an an outside financial company to console us and they asked if I was crazy doing what I was doing if I wanted to retire in 3 years!

NWBound, excellent observations, thank you for them!

Fear of doing the wrong thing as LOL pointed out is creating a conflict. I could be right or wrong whichever way I go. TR accounts do have an advantage as another poster said!

 

[veremchuka]

Veremchuka,

I re-read your original post. You mentioned that you have 37% equities, 65% fixed income and want to be allocated 50/50. So instead of selling equities to take profits because that's at an all-time high, wouldn't you instead want to sell fixed income and buy equities to get the allocation to 50/50?

IMO, it's more important to get the portfolio to proper allocations, then to ask is it a good time to be in the market or not.

Yes but did you read what I did in April 2010? That has a lasting effect on these types of 'big' moves!

 

[Moemg]

Why can't you give us a little heads up before the market close? I haven't done the head banging thing in awhile. Felt good.



.

W2R gave a early Whee on 8/11 in the "What do you do all day thread "

I think so, too. In fact, I very nearly called a "Wheee!" last night when I discovered that my portfolio hit another all time high, even higher than it was last spring.

That made me run to my portfolio and skim off some profits .You can call me a dirty rotten market timer but that sign works every time . So throw away the expensive news letters and just go with the Whee.

 

[pb4uski]

Is this in your taxable account? In other words, are you trying to take some gains since cg gain taxes are attractive or to offset existing loss carryovers and get in again?

For me, while it may feel like a top - who knows! I have long ago given up trying to call tops and bottoms to eek out more return because it seems to me that the likelihood of being able to correctly call a top AND a bottom which is necessary to profit from market timing MUCH lower than missing more of a rally or not getting back in before the next rally.

Anyway, it seems that your hesitation is that you think this may be a top so if I were you I would just stand pat and then start moving between fixed income and equities once the S&P crosses 1325 on some pre-decided pace until you get to your target AA.

 

[veremchuka]

No these funds are in my rollover IRA and Roth.

 

[Gotadimple]

Verumchuka,
You don't say what kind of equities you are invested in, just that they are mutual funds. You also say you have investigated ETFs but are concerned.

Here's an alternative to consider: index funds, either purchased as a mutual fund, i.e., Vanguard S&P 500 Index fund or as an ETF. In both cases, the price of the fund (net asset value) is a fair statement of the market worth of the basket of funds. In both cases, the expense ratio becomes the deciding factor. Usually ERs of ETFs are lower than the mutual fund.

The good news is that Vanguard has both index mutual funds and ETFs versions of those same funds. So, making choices about your equity allocation becomes a little easier. As long as:

* you understand the index the fund/ETF is tracking and you are comfortable with the index being tracked,
* then the choice is mutual fund which requires you wait until the end of the day to make the buy/sell, or ETF that let's you buy/sell during the day. Which one has a lower ER?

Secondly, you expressed some concern about having to wait the 60 day period to avoid a wash sale. As you know the wash sale tests if you are re-investing in a substantially similar investment during the 60 day period. To avoid this, you might want to:

* Take your equity profits, as you have explained
* Start investing into your equity 50/50 allocation (assuming the 50% equity is not just a single class like large company stock) and invest on dips in the market. That means it will take longer to get to your allocation, but should hopefully resolve the issue you have of buying high.
* Know that it will go down, it always does. But if you've picked an index that is reasonably stable for the basket of stocks it tracks, it will go back up over time. Time means more than 1 year, more like 5 years.

No one likes to see an investment go down, but it does happen. They also go back up.

 

[easysurfer]

Yes but did you read what I did in April 2010? That has a lasting effect on these types of 'big' moves!

Like you are saying, each move can be thought of as a good or bad move. For example, let's say you decide not to buy into equities now because it's close to an all time high since some time before. But what if the market then goes up on a bigger run and because you had a low percentage in equities, then it'll be even more painful to jump back in for you.

IMO, the very reason why I only deal with AA and rebalancing is to keep my emotions out of the equation. I don't trust myself enough to say I know if the market is headed up or down. But I do know how to do the math to keep track of my allocations and rebalance. Plus, the AA and rebalance approach makes me sleep a lot better at night.

 

[LOL!]

Without a taxable account and only IRAs, wash sales are moot for veremchuka. And so is tax-loss harvesting. I think the 60-day story was a Vanguard frequent-trading restriction.

 

[Lsbcal]

...(snip)...
Fear of doing the wrong thing as LOL pointed out is creating a conflict. I could be right or wrong whichever way I go. TR accounts do have an advantage as another poster said!

I have done some market timing but only after extreme backtesting. If my forward planning ideas did not work in the past, then I would not be confident in it for the future. Even if it works in the past, it may fail in the future. That is why I settled on picking the AA and slicing off the equites at 1% over my allocation. I did not pick this approach simply by listening to others talk about hopes and fears for the future.

If you are not willing to do the backtesting homework (most people are not) then it would be best to listen to a reasonable expert and go with that plan. By experts I'm thinking of people like Bernstein or Swedroe types.

 

[ejman]

I have done some market timing but only after extreme backtesting. If my forward planning ideas did not work in the past, then I would not be confident in it for the future. Even if it works in the past, it may fail in the future. That is why I settled on picking the AA and slicing off the equites at 1% over my allocation. I did not pick this approach simply by listening to others talk about hopes and fears for the future.

If you are not willing to do the backtesting homework (most people are not) then it would be best to listen to a reasonable expert and go with that plan. By experts I'm thinking of people like Bernstein or Swedroe types.

I'm curious as to the practical application of the 1% rule. Markets often have a 1-2% swing even on a daily basis. So presumably, you would occasionally have rebalancing events in rapid sequence at times. How do you deal with this?

 

[LOL!]

While 1% is a little too tight even for me, think of this: A 1% swing in equities for a 60:40 portfolio means you went to 60.6/100.6 = 60.2%, so you ain't at 61% yet.

But a 5% swing in equities would be 63/103 = 61.2%.

 

[utrecht]

Yes, I have considered this as a rebalancing option. It is hard to buy poor performing assets! Rebalancing is not easy, it is something I have never done. When I worked I just poured money into equity funds and it wasn't until a few years before retiring that I had a more balanced AA. My employer hired an an outside financial company to console us and they asked if I was crazy doing what I was doing if I wanted to retire in 3 years!

NWBound, excellent observations, thank you for them!

Fear of doing the wrong thing as LOL pointed out is creating a conflict. I could be right or wrong whichever way I go. TR accounts do have an advantage as another poster said!

So you don't want to buy international equities because they are a poor performing asset right now and you don't want to buy US equities because they are at 4.5 year highs and are assets that are performing great right now?

 

[Lsbcal]

I'm curious as to the practical application of the 1% rule. Markets often have a 1-2% swing even on a daily basis. So presumably, you would occasionally have rebalancing events in rapid sequence at times. How do you deal with this?

I think LOL got it right above. As I mentioned, this only triggers about 4 times a year on average. I just like the idea that I'm at my max equity allocation and have defined a limit. Making small changes is easier on me emotionally -- which I think this thread is mostly about, dealing with your emotions. This is definitely not the only way to handle rebalancing, just an easy one for me.

Also I don't rebalance if equities decline. However, if they decline enough under certain circumstances I might sell equities.