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Old 08-10-2011, 11:56 AM   #21
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What if it was in balance early last week, rebalanced mid-day yesterday, out of balance at the close of the market yesterday but back in balance now? I suppose I'm listening to the wrong band, eh?

Note to readers: this and my previous post above is a lame attempt at humor as we experience 'interesting' market activity...
Yes LOL! Maybe your trigger is too sensitive? Listening to the wrong band - definitely! LOL!

Audrey
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Old 08-10-2011, 12:01 PM   #22
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FWIW I set my band at 8 to 10% of an allocation, so if my equity is off 4 to 5% then it's time to rebalance.
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My bands as twice as wide as yours, by the way, but I probably have a higher equity % allocation.
Perhaps I misunderstood your post above. My AA is 45:55 equities:fixed. My band would be 42.5% - 47.5% equities, plus or minus 2.5% of my portfolio (which would be plus or minus 5.6% of my equity allocation of 45%).
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Old 08-10-2011, 12:05 PM   #23
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My bands used to be 10%, i.e. if SPY allocation was 20%, rebalance at 18 or 22%.

That turned out to be too narrow in 2008-2009. I'm now at 25%, so 15% or 25%...
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Old 08-10-2011, 01:26 PM   #24
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Maybe it's the laziness in me , but as of today, I'm gonna just rebalance at the start of the year. Otherwise it seems too much work for only a possible benefit.

I compare that to mowing the lawn. One can mow it every day or every other day to make the lawn nice and trim at all times. Or one can wait a week when the grass gets uneven and shaggy
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Old 08-10-2011, 02:11 PM   #25
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P.S. And, um, you're not supposed to let the market rebalance your AA for you LOL!
Darn! That's where I am getting it wrong!!
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Old 08-10-2011, 03:58 PM   #26
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The rebalancing issue has been discussed extensively on bogleheads as well. My take from it all is that it doesn't really help/hurt returns significantly - but it does manage your level of risk. I use 5% absolute for the bigger chunks and then 25% relative changes for the small slices. ie my Domestic equity is 36% of my AA so it can vary from 31-41% before triggering a rebalance. My EM is 5% so it can vary 5 +/- 0.25*5 so it can vary from 3.75% to 6.25%

I had been running pretty close to my AA until this past 2 weeks. I checked on monday after the drop and I still had not hit my bands and actually had a fair ways to go so no rebalance yet for me.

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Old 08-10-2011, 04:03 PM   #27
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P.S. And, um, you're not supposed to let the market rebalance your AA for you LOL!
No one was complaining in 2010 when it was bringing their equities back up

DD
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Old 08-10-2011, 04:06 PM   #28
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I feel that band width should be proportional to the standard deviation of the DJIA. (Just kidding.)
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Old 08-10-2011, 04:37 PM   #29
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No one was complaining in 2010 when it was bringing their equities back up

DD
Those who "forgot" to rebalance when they were out of balance, that is. LOL!

Audrey
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Old 08-10-2011, 05:02 PM   #30
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When I had a bonus come in (when I was w*rking), pared off some company stocks or options, converted a 401K to IRA, or pulled out money from my taxable account for some large expense, I use that as an opportunity to rebalance. I also look once a year around my birthday. Last year I knew I had some converting and shifting of assets so I just planned to fix the AA then. I should probably check to see where I'm at right now.
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Old 08-10-2011, 05:43 PM   #31
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No one was complaining in 2010 when it was bringing their equities back up

DD
I didn't complain, but I "rebalanced" my equity allocation down about 15 percentage points, which required a ton of selling. Another week like this past one and it will be time to start increasing equity allocation's back up. Stuck a toe in today by selling some 30 year bonds that are up 37% and bought a small amount of equities.

AA is about risk management, in my view. Fixed AA don't do enough in this regard (also in my view).
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Old 08-10-2011, 07:30 PM   #32
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A problem with rebalancing when things get out of whack is that you might be too scared to look at your portfolio.
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Old 08-10-2011, 07:34 PM   #33
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Obviously mutual fund transactions take time, so that would make little to no sense on a practical level during a week like this one, when rebalancing would have been justified on Monday but not on Tuesday, etc.
Can't you solve that by doing your rebalancing at the of the trading day?
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Old 08-10-2011, 08:08 PM   #34
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Can't you solve that by doing your rebalancing at the of the trading day?
I'll defer to Vanguard on that one... here are the rules

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Your Vanguard® fund exchange will be processed using the closing share price on the business day on which Vanguard receives your request. Requests received after the close of the New York Stock Exchange (usually 4 p.m., Eastern time) will be processed using the next business day's closing price.
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Old 08-10-2011, 08:28 PM   #35
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I have read that Two years was more optimal than one for rebalancing. The rational was that re-balancing too often never let you buy in at a deep low, or sell you out before a nice peak. If memory serves, L Swedroe wrote of this. He also suggested rebalancing at 10% or greater. Again, too often just churns without reaping the benefits.
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Old 08-10-2011, 08:31 PM   #36
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I'll defer to Vanguard on that one... here are the rules
I think what T-Al is saying is, you can enter the trade 10 minutes before market close, and it will be transacted at the closing price that day. If you assume the market isn't going to move all that much in the last few minutes, it is a way to act on the days movement.

I've done it before.

Turn this around:

Quote:
Requests received after the close of the New York Stock Exchange (usually 4 p.m., Eastern time) will be processed using the next business day's closing price.
to: (re-phrasing) -
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Requests received BEFORE the close of the New York Stock Exchange (usually 4 p.m., Eastern time) will be processed using THAT business day's closing price.

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Old 08-10-2011, 08:36 PM   #37
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I have read that Two years was more optimal than one for rebalancing. The rational was that re-balancing too often never let you buy in at a deep low, or sell you out before a nice peak. If memory serves, L Swedroe wrote of this. He also suggested rebalancing at 10% or greater. Again, too often just churns without reaping the benefits.

Perhaps two year intervals are better. But I'd prefer to just do so once a year because it's easier to remember, without having to think, "Did I rebalance last year already or not?"

On using a two year interval to try to buy at a deep low, or sell at a nice peak...begs the question..how do you know you are at a low or peak? Trying wait for those conditions..hmmm...wouldn't that seem like..um. Market Timing?
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Old 08-10-2011, 09:01 PM   #38
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You would not know if you are at a peak or trough with a two year look, just whether you were out of balance enough to bother to rebalance.

I often wondered about the time of year to rebalance. Fiscal quarters force a lot of movement from the active funds as they try to get the sexy starlet stock into their portfolio and bail on the dogs before it's time to print the prospectus'. That churn is an indexers opportunity.

Besides, all that rebalancing every year is too much like w@i^K.
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Old 08-10-2011, 09:19 PM   #39
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I think what T-Al is saying is, you can enter the trade 10 minutes before market close, and it will be transacted at the closing price that day. If you assume the market isn't going to move all that much in the last few minutes, it is a way to act on the days movement......

-ERD50
That is what I did on Monday. I used the change in the Vanguard Total Stock and Total Bond ETFs from opening to 3;45 pm to estimate the change in the Vanguard Total Stock and Total Bond funds for the day and used those estimates to determine the amount of my trade to get back to 60/40. Then submitted my trade at 3:50 pm. Worked like a charm.
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Old 08-10-2011, 09:34 PM   #40
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That is what I did on Monday. I used the change in the Vanguard Total Stock and Total Bond ETFs from opening to 3;45 pm to estimate the change in the Vanguard Total Stock and Total Bond funds for the day and used those estimates to determine the amount of my trade to get back to 60/40. Then submitted my trade at 3:50 pm. Worked like a charm.
Yes, that's what the quote from Vanguard says (quite clearly, I thought, so kudos to Vanguard). I have done that in the past as well.

It's this thing about being retired... we spend the afternoons together. As you might expect, the two of us often seem to find ourselves otherwise occupied in more pleasurable pursuits instead of following the market like a hawk and rebalancing.
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