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Old 08-29-2010, 05:50 PM   #21
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... But the longer the downturn lasts, the smaller your cash bucket gets and the more out of whack you are from your targets. At what point do you figure that you should start replenishing cash in case of a new, bigger downturn? In essence when do you call a restart and get back in AA balance if you don't fully recover? I'm not there yet but no one has spelled out a compelling strategy to achieve this.
You are supposed to be rebalancing all along. That means buying equities when they drop. Perhaps that is not compelling to bucketeers.

For myself, I do not rebalance continuously, but do so when things get out of their range. A standard range would be the larger of 5% of total portfolio value or 25% of an asset class. I think good days to look whether you should rebalance are those one-day worst days in the market where things drop by 3% to 4% or more. They do not happen that often ... maybe 2 to 6 times a year.
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Old 08-29-2010, 08:11 PM   #22
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You are supposed to be rebalancing all along. That means buying equities when they drop. Perhaps that is not compelling to bucketeers.
How often to rebalance is not a slam-dunk. There are some who favor very frequently, like every month or two, and others like Otar who favor every 4-5 years. The available models and analyses that I have read are far from definitive.

I hope to rebalance every two years or so within each bucket (e.g. among different types of bond holdings) and maybe every 4 years or so between buckets (swapping fixed and equity funds). Rebalancing "all along" might mean different things to different investors.
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Old 08-29-2010, 08:41 PM   #23
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I agree.

I think folks might be surprised how rarely they would rebalance when using the 5/25 ranges. It could be every 4 to 5 years especially if they did not re-invest dividends and other distributions, but used them judiciously.

Anyways, rebalancing is more about keeping the same level of risk and not about making lots of money on it.
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Old 08-29-2010, 09:49 PM   #24
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You are supposed to be rebalancing all along. That means buying equities when they drop. Perhaps that is not compelling to bucketeers.

For myself, I do not rebalance continuously, but do so when things get out of their range. A standard range would be the larger of 5% of total portfolio value or 25% of an asset class. I think good days to look whether you should rebalance are those one-day worst days in the market where things drop by 3% to 4% or more. They do not happen that often ... maybe 2 to 6 times a year.
I don't know...that sounds an awful lot like market timing to me.
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