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RunningBum · 08-25-2010, 11:02 AM

Do you consider rebalancing due to asset allocation a form of market timing?

**FIREd** · 08-25-2010, 11:17 AM

If it's done while following a pre-established mechanical rule, then I don't think rebalancing is market timing. If it's done in response to fear or greed, then I think it is market timing.

I think I am a market timer and I believe most people are as well to some degree. Even the Boglehead forum is replete with people trying to time the stock and bond markets.

rescueme · 08-25-2010, 11:22 AM

Quote:

Originally Posted by FIREdreamer

If it's done while following a pre-established mechanical rule, then I don't think rebalancing is market timing. If it's done in response to fear or greed, then I think it is market timing.

+1

CuppaJoe · 08-25-2010, 11:23 AM

My Asset Allocation has always been flexible.

NW-Bound · 08-25-2010, 11:34 AM

Just voted "Other".

Why?

Because nobody has selected that yet, and I always want to be different.

LOL! · 08-25-2010, 11:35 AM

I'm confused by the options. For example, isn't

"Yes, but only if done when your portfolio is out of balance"

supposed to be

"No, but only if done when your portfolio is out of balance"

??

rescueme · 08-25-2010, 11:42 AM

Quote:

Originally Posted by NW-Bound

I always want to be different.

Congrats! You've succeeded in your goal

...

**Alan** · 08-25-2010, 11:50 AM

Quote:

Originally Posted by FIREdreamer

If it's done while following a pre-established mechanical rule, then I don't think rebalancing is market timing. If it's done in response to fear or greed, then I think it is market timing.

I agree with this. As I grew closer to RE I changed my target AA every 5 years or so, reducing the percentage of stocks held. I usually only re-balance once a year although once or twice I have done so part way through a year when the percentage of stocks went off by 5%.

Now that I'm RE'ed I'm considering once every 4 years as per Jim Otar's recommendation although I don't know if I'll be able to leave it alone for that long if there is a lot of volatility.

dex · 08-25-2010, 11:58 AM

I voted no, never.

RunningBum · 08-25-2010, 12:10 PM

Quote:

Originally Posted by LOL!

I'm confused by the options. For example, isn't

"Yes, but only if done when your portfolio is out of balance"

supposed to be

"No, but only if done when your portfolio is out of balance"

??

I suppose it depends which way you view it. The intent of that answer is "Yes, it's market timing if you rebalance your portfolio whenever if it X% out of you AA range. No if you do it only on an regular schedule only."

I didn't consider No a valid answer if there are times when you would consider it market timing. At least that's how I intended to word it.

I realize I left 3 possibilities for "Yes, only if ..." and some may consider it market timing for 2 of the 3 cases, in that case either pick one of the cases or choose other.

RunningBum · 08-25-2010, 12:12 PM

Quote:

Originally Posted by dex

I voted no, never.

You realize that's the complete opposite of what you said 15 or 20 times in the other thread, right? Unless I worded the poll incorrectly.

audreyh1 · 08-25-2010, 12:14 PM

Quote:

Originally Posted by RunningBum

You realize that's the complete opposite of what you said 15 or 20 times in the other thread, right? Unless I worded the poll incorrectly.

I theorize that Dex is actually the 1 vote for "yes, always".

Audrey

audreyh1 · 08-25-2010, 12:17 PM

Yes, but only if you change your target asset allocation based on current perceived market conditions - especially if you plan to return to your "regular" allocation when market conditions appear to improve.

Otherwise, no.

Audrey

dex · 08-25-2010, 12:22 PM

Quote:

Originally Posted by RunningBum

You realize that's the complete opposite of what you said 15 or 20 times in the other thread, right? Unless I worded the poll incorrectly.

When the results are in they will need to be re-balanced into the expected answer ratio so, how any one person votes doesn't really matter.

RunningBum · 08-25-2010, 12:24 PM

Quote:

Originally Posted by FIREdreamer

If it's done while following a pre-established mechanical rule, then I don't think rebalancing is market timing. If it's done in response to fear or greed, then I think it is market timing.

Curious about that answer, and really, there is no wrong answer, but I wonder how much fear or greed there is in getting back to your 60/40 or 50/50 or whatever AA?

I put this answer in because I realized some people may reallocate for reasons other than the calendar tells them, or their portfolio is more than X% off, X being a pre-determined number. I didn't know what those reasons would be, but I know some could be that they just feel the market may recover, and realize their portfolio is low on stock wrt their AA (or vice versa), so they chose to rebalance at that time. I could see that considered market timing, though really I think of it as just getting back on plan. If it's pretty far off your AA and it's been more than a year or two since you adjusted, I don't think you really have an AA plan, since in my opinion you have to not only pick an AA but also have a method to keep it at that AA over the years.

btw, if someone has a 50/50 AA, and thinks things will get bad and changes to 25/75, I don't consider that to be a reallocation of their AA. That's changing their AA plan, and I consider that market timing. If they just adjust their AA a % or 2 because they are a year older, I don't consider that timing if they are consistent with it.

RunningBum · 08-25-2010, 12:28 PM

Quote:

Originally Posted by audreyh1

Yes, but only if you change your target asset allocation based on current perceived market conditions - especially if you plan to return to your "regular" allocation when market conditions appear to improve.

Otherwise, no.

Audrey

Yeah, I should've been more clear that I meant that you are rebalancing to put your portfolio in line with your planed AA, not changing it to a new AA.