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Old 08-10-2011, 11:06 PM   #41
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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?"
The easiest thing I find when doing something infrequently like that is set a rule, so I don't have to remember.

I.e. Rebalance in even numbered years.

Another example: Leap years. Ask yourself hmm, was 2006 a leap year? Will 2022 be? Leap years are easy to remember because they coincide with presidential elections. Much easier (for me) to remember Bush got elected in 00 and 04 and Obama in 08, and the next election is 2012 than remember which year was a leap year. (If you don't follow politics much and couldn't tell when the next presidential election was, find a rule that works for you).

But remembering stuff becomes a lot easier with rules and tricks.
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Old 08-11-2011, 04:09 AM   #42
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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.
Otah (Unvealing the Retirement Myth) recommends that, historically, every 4 years at the end of a presidential election year gives the best results.

Having said that, up to now I have been re-balancing every year or when I get out of balance by 5%. But now that most of our funds are in target retirement accounts the re-balancing is handled for me.
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Old 08-11-2011, 07:38 AM   #43
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The easiest thing I find when doing something infrequently like that is set a rule, so I don't have to remember.

I.e. Rebalance in even numbered years.

Another example: Leap years. Ask yourself hmm, was 2006 a leap year? Will 2022 be? Leap years are easy to remember because they coincide with presidential elections. Much easier (for me) to remember Bush got elected in 00 and 04 and Obama in 08, and the next election is 2012 than remember which year was a leap year. (If you don't follow politics much and couldn't tell when the next presidential election was, find a rule that works for you).

But remembering stuff becomes a lot easier with rules and tricks.

That's a good idea, about setting up the rules, such as the even numbered years for example.

I do the same for leap year (knowing that it's same as presidential elections).
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Old 08-11-2011, 08:24 AM   #44
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I thought the idea of rebalancing was to force you to buy low and sell high. The opposite of most people's instincts (including mine) and therefore in need of an enforce mechanism. That is why I use an approximate annual rebalance, but if there is a huge swing like this week or where we sat on the high side in early July, I also rebalance. This amplifies the buy low - sell high nature. I don't need a back test to know this is better. The magnitude of the improvement is dependent on the size of the swings and the faithfulness of following through. If you just rebalance annually you may not have much too do as your AA maybe fine, but then you aren't buying low and selling high. Now I don't fret about hitting the top and bottom. I don't believe that is possible. But I know when the market is "down" (now) and when it is high (July). I can also look at my AA to know when I have more equities than I should or more fixed income than I should (vs. my AA). As long as you are not generating short term gains go for it on the swings! As I figure the numbers if you rebalance a 50% AA on a 20% drop (note this costs you 20% of your fixed income!) you get a 2.5% extra gain, when the market has recovered minus what you would have gotten in the fixed income, but plus dividends which should more than offset the fix income loss. So the gains are not huge but the are worth claiming IMHO, especially sine the program trading of big investors is causing these swings to flush out nervous money as profits for them. Why not ride the waves?
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Old 08-11-2011, 09:27 AM   #45
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I use a wide 10% band for formal rebalancing (the current band is 50 to 60% equities) and hardly ever actually get to do it. There is some minor ongoing rebalancing as I sell my anticipated living expenses for next year if equities have had a positive year and draw form cash balances if not but typically this is a minor 1 - 2% (I take all taxable account distributions in cash). I was almost ready to rebalance at the prior peak in late April/early May but the market has rebalanced my allocation to about 56% on its own.

A related question/concern is that I've thinking of ratcheting down my equities allocation to the 45 -55% range as I'm now almost 61 and conceptually I would like to get to a long term 50/50 and remain there ( within the wide bands mentioned above)

From a gut instinct level, I would like to rebalance when equities are high but from some of the comments here, I get the impression that it really doesn't matter much.

So my options are:

1) do nothing, let the market do the rebalancing (currently just above the upper range of where I want to be)

2) Rebalance now

3) wait for the current excitement to pass before taking action

Thoughts? suggestions?
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Old 08-11-2011, 09:38 AM   #46
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For me, I've decided to just rebalance annually (in early January when I do all my other stuff -- like determining how much to withdraw each month from my MMF to checking, etc.)

The way I figure, who knows how many more major up/down swings the market will have until then end of the year.

Otherwise, wouldn't I be making too much work for myself?

I guess a comparison is do I check my email every hour in a day or wait until the end of the day to check all of them? Either way, I'll be pretty much accomplishing same thing...picking up my emails..

Just a matter of preference, it seems.
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Old 08-11-2011, 01:27 PM   #47
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For me, I've decided to just rebalance annually (in early January when I do all my other stuff -- like determining how much to withdraw each month from my MMF to checking, etc.)

I noticed that there are some that rebalances in early January. Will this not cause a lot of of equities being sold or bought (depending on the previous year's performance)?

I think it is better to schedule the rebalancing on your birthday or any other significant date (anniversary, etc).
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Old 08-11-2011, 01:38 PM   #48
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I noticed that there are some that rebalances in early January. Will this not cause a lot of of equities being sold or bought (depending on the previous year's performance)?

I think it is better to schedule the rebalancing on your birthday or any other significant date (anniversary, etc).
I try to do the majority of the rebalancing within retirement accounts to not have a tax impact.

Though, on a good previous year, I might have some gains outside of retirement accounts to replenish my emergency cash fund for the upcoming year.
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Old 08-11-2011, 03:23 PM   #49
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No need to rebalance - ever, if you put everything in the new Vanguard Tuesday & Thursday Fund (VTUTH). It is an S&P 500 index fund on Tuesdays and Thursdays and a money market fund on Mondays, Wednesdays an Fridays.

The fund strategy was back tested against this weeks market performance and it looks to be a strong performer.
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Old 08-11-2011, 03:34 PM   #50
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No need to rebalance - ever, if you put everything in the new Vanguard Tuesday & Thursday Fund (VTUTH). It is an S&P 500 index fund on Tuesdays and Thursdays and a money market fund on Mondays, Wednesdays an Fridays.

The fund strategy was back tested against this weeks market performance and it looks to be a strong performer.
And on weekends it bets on the PA State lottery.
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Old 08-11-2011, 03:52 PM   #51
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And on weekends it bets on the PA State lottery.
A necessary diversification!

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Old 08-11-2011, 05:54 PM   #52
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Otah (Unvealing the Retirement Myth) recommends that, historically, every 4 years at the end of a presidential election year gives the best results.

Having said that, up to now I have been re-balancing every year or when I get out of balance by 5%. But now that most of our funds are in target retirement accounts the re-balancing is handled for me.
So how do target funds and balanced funds fairmcompared to periodic rebalancing? don't even know how to check that, but would br interesting to me. If I am notmgoing to rebalance should I just use amTR or balanced fund?
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Old 08-18-2011, 06:16 PM   #53
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It would be hard for me to wait two or four years. Come December in an up year, I can't wait to lock in those gains.
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Old 08-19-2011, 04:35 AM   #54
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No need to rebalance - ever, if you put everything in the new Vanguard Tuesday & Thursday Fund (VTUTH). It is an S&P 500 index fund on Tuesdays and Thursdays and a money market fund on Mondays, Wednesdays an Fridays.

The fund strategy was back tested against this weeks market performance and it looks to be a strong performer.

Bloody hell what happen to VTUTH. On Monday it was in money markets and the market was up, Tuesday it was in stocks and the market was down, Wed it was money markets and the market was up. Then Thursday it got creamed. The market better stay down today or I'm going to declare this is horrible fund.

Or maybe even better start the VSTUTH which is double short version of VTUTH.
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Old 08-19-2011, 04:43 AM   #55
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Bloody hell what happen to VTUTH. On Monday it was in money markets and the market was up, Tuesday it was in stocks and the market was down, Wed it was money markets and the market was up. Then Thursday it got creamed. The market better stay down today or I'm going to declare this is horrible fund.

Or maybe even better start the VSTUTH which is double short version of VTUTH.
I gave up - and moved everything to VWTF...
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Old 08-19-2011, 06:51 AM   #56
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I gave up - and moved everything to VWTF...

Geez now you tell us. At least W2R gives us some advance warning.
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Old 08-19-2011, 07:44 AM   #57
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Also good: VOMG and VLOL.
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Old 08-19-2011, 08:04 AM   #58
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So how do target funds and balanced funds fair compared to periodic rebalancing? don't even know how to check that, but would br interesting to me. If I am not going to rebalance should I just use a TR or balanced fund?
That's a good question and I don't know the answer either. While I am simplifying the portfolio for DW's sake, I'm actually getting used to the idea myself of never having to re-balance manually.
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Old 08-20-2011, 06:51 AM   #59
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Also good: VOMG and VLOL.
I just looked and noticed VG converted me to those without asking.
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