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Rebalancing? Naaah
Old 10-17-2012, 01:16 PM   #1
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Rebalancing? Naaah

I was all set to rebalance this month per my long-standing plans. I had the spreadsheet and assumptions all set to go, stocks and bonds neatly laid out; foreign, domestic, indexes, short and intermediate term, all just dying to be re-arranged.

Huh? On looking at my uber-spreadsheet, things had barely budged. Monthly budget and expenses closely matched the original SWR. Almost all allocations (not that many to begin with) were within 1-2% of original.

Conclusion: carry on without any changes.

Geez, that was so boring.
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Old 10-17-2012, 01:24 PM   #2
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Just looking at the thread title, I jumped and asked myself "How did I miss a Whee signal? Gosh, and I thought I spent too much time here."

Phew! I am still OK then. Not doing a lot here either, but just shuffle some stocks around, selling some winners to buy some losers that appear to have bottomed out.
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Old 10-17-2012, 01:37 PM   #3
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Sometimes boring isn't too bad...

I update my percentages on a monthly basis to see if any adjustments should be made.

My name is bbbamI and I'm a nerd. Maybe my name should be nerdamI.
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Old 10-17-2012, 01:44 PM   #4
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Never boring is why I like to own individual stocks, and look at them daily (several times a day actually when I am at home), though I trade less than Wellesley's manager.

Why, I can never tell which ones are coming, and which are going. What wins today will lose tomorrow. It keeps life exciting!

PS. Life is too short. Make it sufficiently complicated, and it is more fun.
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Old 10-17-2012, 01:48 PM   #5
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I check my AA percentages several times a week, but unless something is really off, I usually just rebalance once a year.

However at the end of every month, I total up every cent I spent and re-figure my projected spending for the year. Seems like it has not budged more than 3% one way or the other from last year's spending. Hurricane Isaac evacuation and repairs came to just under $1K, my Wii broke so I had to replace it, and I seem to have become an Amazon addict, but somehow my overall spending is still in the ballpark.

Rich, I love keeping track of these things! It always amazes me that I am not working and yet I am completely fine financially. Seems like magic, or a dream come true.
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Old 10-17-2012, 01:59 PM   #6
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Rich, I love keeping track of these things! It always amazes me that I am not working and yet I am completely fine financially. Seems like magic, or a dream come true.
I too "check my totals" every night; mostly for fun, but also to gauge my progress against what I hear on CNBC et al.

Like you I find comfort in telling myself, "well, I've been RE'd for seven years now, the bills are getting paid and I'm worth more now than ... ever", so I must be doing something right.
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Old 10-17-2012, 02:47 PM   #7
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I like it when that happens. That is, all ready to pull the trigger and rebalance when I find out the allocations don't require so. Makes me think that at least I'm doing somethng right.
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Old 10-17-2012, 03:15 PM   #8
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I never really look at my asset allocation, only my net gain.
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Old 10-17-2012, 03:23 PM   #9
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Sometimes boring isn't too bad...
Agree. Normally I'll look at it for rebalancing about once a year or if something goes bonkers. This year was just a coincidence.
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Old 10-17-2012, 03:28 PM   #10
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I check my AA percentages several times a week...

Rich, I love keeping track of these things! It always amazes me that I am not working and yet I am completely fine financially. Seems like magic, or a dream come true.
Yep, one of those "I can't believe this is happening" things. I keep tabs about once weekly or bi-weekly with just a quick look, quarterly for more details, annually for a rebalance session.
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Old 10-17-2012, 03:50 PM   #11
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I normally review all my holdings and allocation quarterly and only rebalance if I've exceeded the 5/25 rule. My Excel spreadsheet automatically evaluates it for me, and pops up a message only if outside 5 or 25. And even then I think through the tax implications - and may choose to leave things as the are if I think AA may come back inside 5/25 "on it's own." I'd never rebalance to correct a 1-2% deviation from target, that could just be market noise. YMMV

The 5/25 rule. This rule has you rebalance using bands. The “5″ portion of the rule means that if an asset allocation deviates by an absolute percentage of 5% of the portfolio then you rebalance it. This refers to the big blocks in your portfolio. For example, if your portfolio calls for 30% international stocks you’ll rebalance when that percentage hits either 35% (selling some) or 25% (buying some more.) It may also refer to the overall stock:bond ratio. For example, a 50% stock portfolio may need to be rebalanced if it becomes a 45% stock portfolio, even if none of the individual stock asset classes have fallen enough to justify a rebalancing event. For example, a portfolio that is 25% US stocks and 25% international stocks where both components have fallen to 22.5% of the portfolio.

The “25″ portion of the rule refers to the smaller asset classes in the portfolio, for example, those chunks that may make up only 5-10% of the portfolio. This refers to a change in the asset class that is a relative 25% of that asset class. If your asset allocation calls for a 10% allocation to gold, for instance, then you would rebalance when it hit 12.5% (sell) or 7.5% (buy). Likewise, a 5% position to emerging market stocks would be rebalanced at 3.75% and 6.25%.
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Old 10-17-2012, 05:18 PM   #12
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Midpack - That is one of the coherent and concise descriptions of the 5/25 rule I've seen. Thank you.
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Old 10-17-2012, 05:39 PM   #13
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Rich, I love keeping track of these things! It always amazes me that I am not working and yet I am completely fine financially. Seems like magic, or a dream come true.
Before I retired a year and a half ago, I had this vision that I would have to (painfully) withdraw $4,000/month out of my portfolio and deposit it into a local checking account - and live on those funds. It hasn't worked out that way at all. I changed all my holdings in my taxable investment account to send dividends and cap gains into my MM account. So far, I'm living on the dividends and gains - which is way cool! I did buy a new car, and used some savings for that, but my living expenses are totally covered. Once the DW retires, things will change as we'll travel much more, and have to buy private health insurance (ugh ) but for now, I'm on auto pilot!
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Old 10-17-2012, 08:05 PM   #14
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Originally Posted by Rich_in_Tampa View Post
I was all set to rebalance this month per my long-standing plans. I had the spreadsheet and assumptions all set to go, stocks and bonds neatly laid out; foreign, domestic, indexes, short and intermediate term, all just dying to be re-arranged.

Huh? On looking at my uber-spreadsheet, things had barely budged. Monthly budget and expenses closely matched the original SWR. Almost all allocations (not that many to begin with) were within 1-2% of original.

Conclusion: carry on without any changes.

Geez, that was so boring.
LOL! Sometimes when it's time to rebalance, you don't have to! I don't if things haven't changed enough anyway.

A year in the market can be full of sound and fury, but end up more or less in the same place! Another reason I tend to use a trigger, and not worry about rebalancing otherwise.
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Old 10-17-2012, 08:38 PM   #15
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Huh? On looking at my uber-spreadsheet, things had barely budged. Monthly budget and expenses closely matched the original SWR. Almost all allocations (not that many to begin with) were within 1-2% of original.
Conclusion: carry on without any changes.
Geez, that was so boring.
It'd be a lot more exciting if everything dropped 25% in lockstep...
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Old 10-17-2012, 09:52 PM   #16
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Boring is good...

My AA is boring.

I check my portfolio quarterly these days. For me, rebalancing consists of a few mouse clicks to change my $200/month DCA if necessary. Still contributing at age 54. I plan to keep doing that level of DCA until I draw my own pension in 2 years.
Then it's time to have some more fun traveling out of state.
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Old 10-19-2012, 01:54 PM   #17
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Uh Oh! Dow is down 222 as I write this. Nasdaq down 2%. S&P500 down 1.76%. It's not boring anymore.

Man, I am down 1.72% right now.

Will we "get" to rebalance soon? Thread title changed from "Rebalancing? Naaah" to "Rebalancing? Darn!"?

PS. Correction: that's 1.72% of equities, not of total portfolio. But will have to wait until MF reporting to see the total damage.
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Old 10-19-2012, 02:00 PM   #18
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With the markets being somewhat range bound it may quite a while before rebalance bands are hit. Meanwhile I'll use new contributions to take up the slack in lagging categories.
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