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Old 08-05-2009, 02:15 PM   #21
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My experience is almost identical.

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Originally Posted by audreyh1 View Post
I finally rebalanced my AA retirement portfolio today.
I also rebalanced the US Equity portion of my portfolio (a 401k exchange) on 7/4/2009,

I expect to sell Foreign Equities (a taxable exchange) later this week. I just have to figure out which lots to sell.

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I had rebalanced on the "way down" 3 times - ugh!
I rebalanced multiple times on the way down.

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By Jan 15 I had pretty much used up all that I could invest, so even though the March selloff triggered rebalance again, I was really out of "ammo".
I ran out of "ammo" that I was willing to use in January, because I had decided months earlier on an emergency-fund-in-case-the-sky-really-does-fall-minimum bond balance, which I hit in January.
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Old 08-05-2009, 02:43 PM   #22
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I had a rule that I had to keep at least 10 years of expenses in cash plus bonds in my portfolio just in case of a uber-bear that lasted 10 years. Unfortunately, my bonds funds suffered also during the two huge market V bottoms in Nov and Mar which meant my bonds+cash amount kept going down! By the end of 2008 when I was biting my nails I revised my rule to 12 years, as I was concerned about my bonds. When I rebalanced in Jan I hit that 12 year limit exactly.

So by March, I was already under my 12 years cash+bonds rule, and rebalancing would have brought me down to under 11 years. So I didn't do anything. Besides, that dip was so brief that if you did not catch it within about 2 days, it was already over. I am not able to react that quickly to market conditions. I usually only compute my allocation ratios once a week, and sometimes only monthly.

Audrey
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Old 08-05-2009, 02:58 PM   #23
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Rebalanced to 57% stock on Jan 2, and regretted it until recently.

I had moved 40K from GNMA to MM in March based on some threads here, but yesterday I moved that back and moved 12K from 500 Index to MM for getting my cash fund to about 1 year's expenses (based on thread here, of course).

Bottom line, I'm now at 58/38/4 for Stock/Bonds/Cash, and am happy with that. But I think that in Jan 2010 I'm going to move to 55% stock, or maybe a little less.
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Old 08-05-2009, 03:46 PM   #24
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So why are you waiting until January to rebalance down to 55% stock? Why not do that now?

Audrey
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Old 08-05-2009, 04:08 PM   #25
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Stocks are only about 25% of the wad for us ... so I rode it all the way down (lost 50% ... OUCH). Now off about 33% from the peak.

I try to take some peice of mind in knowing the SP was ~1100 the last time I donated. Still hard to see the peak numbers though.
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Old 08-05-2009, 04:56 PM   #26
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I've been selling equities into the recent rally. I learned my lesson. When you have more than you need, are not getting any younger and want to spend while you can, take some off the table. New allocation = 38/62 per Bogle.
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Old 08-05-2009, 05:14 PM   #27
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So why are you waiting until January to rebalance down to 55% stock? Why not do that now?

Audrey
I'm basing that on the research that shows that rebalancing works best if you don't do it too often. It's not totally clear-cut, but I guess the idea is that if you do it only once a year, or once every two years, you will be taking advantage of trends.

Also, by forcing myself to do it only on Jan 2, I remove emotion or attempts at market timing from the decisions.

I'm kind of suspecting a big drop in the fall, when the recovery doesn't happen as fast as expected. But I'm not acting on that.
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Old 08-05-2009, 05:28 PM   #28
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I believe the bit about not rebalancing too often, under NORMAL MARKET CONDITIONS. In many 12 month periods, asset classes barely diverge enough to justify rebalancing. That's probably why 18 months to 2 years gives better performance (in a taxable account).

I think the reason for that "at least 12 months" between rebalancing rule is so that asset classes have time to sufficiently diverge to gain benefit from rebalancing. But what if asset classes diverge very quickly?

I believe in an apocalyptically (wow - it's really a word!) volatile 2 years like we've just had with such scary extremes, it's a good idea to rebalance when the allocation gets well out of whack. These are unusual times.

This time I let my equity allocation get almost to 60% before rebalancing back to 55%. IMO, that is good enough. And if we are going through several years of rollercoaster, like I believe is likely, then I'd rather rebalance according to the rollercoaster than some fixed time frame. I mean, if the trends accelerate, then maybe the rebalancing should accelerate. Anyhow, I know I'll "feel" better that way.

But that's my instinct, intuition and opinion. I cannot point to any studies to back me up. But that was why I adopted and "out of balance" trigger strategy when I first set up my AA.

Under "normal" market conditions I will only rebalance annually or every 2 years depending on how far things have diverged between asset classes.

Audrey

P.S. Ah! I see Larry Swedroe favors my approach.
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