Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 10-17-2014, 04:07 PM   #21
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
easysurfer's Avatar
 
Join Date: Jun 2008
Posts: 7,885
I rebalance once a year if the allocation differs from my target allocations by 5%.

Target allocation based on my age.
__________________

__________________
Have you ever seen a headstone with these words
"If only I had spent more time at work" ... from "Busy Man" sung by Billy Ray Cyrus
easysurfer is online now   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 10-17-2014, 04:15 PM   #22
Thinks s/he gets paid by the post
Cobra9777's Avatar
 
Join Date: Jul 2012
Location: Texas
Posts: 1,132
I've not been at this very long, so I'm still learning. As others have said, in the accumulation phase, you just redirect new money to keep things balanced. Since retiring last year, I just rebalance as part of other unrelated tweaks to the portfolio. For example, I made two small changes in the last year to reduce ER and improve tax efficiency. Each time, I also brought the allocation back into balance at the same time. Currently, I'm not happy with a small position in BNDX (international bonds, high duration, low yield). I may use this little correction, to dump BNDX and buy some more international stock, where I'm lower than my target.
__________________

__________________
Retired at 52 in July 2013. On to better things...
AA: 55% stock, 15% real estate, 27% bonds, 3% cash
WR: 2.0% SI: 2 pensions, some rental income, SS later
Cobra9777 is offline   Reply With Quote
Old 11-23-2014, 08:35 AM   #23
Thinks s/he gets paid by the post
Huston55's Avatar
 
Join Date: Jul 2011
Location: The Bay Area
Posts: 1,801
Quote:
Originally Posted by Live And Learn View Post
I love the idea of having a pre-written policy to use during retirement. I did a search and found this on Bogelheads:

Investment policy statement - Bogleheads

I'll be drawing one of those up in the next week or two !
Quote:
Originally Posted by pb4uski View Post
I did it more if something were to happen that DD (my CPA daughter) would understand what I am doing and why) and carry on managing the nestegg for DW.
+2

I developed our IPS recently to be there for DW in case I'm incapacitated or die, and to guide discussions with the FIDO rep.

edit: I also have to say that the IPS exercise, the necessity to have to write it, helped crystalize some details for me.
__________________
You may be whatever you resolve to be.
Huston55 is offline   Reply With Quote
Old 11-23-2014, 09:19 AM   #24
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,616
I have written about how I rebalance in the LOL!'s Market Timing Newsletter thread.

I have relatively tight rebalancing bands for equities of about +2% on the positive side and -3% on the negative side. These percentages are not cast in stone since I require the market to have big one-day moves when my portfolio is near one of these percentages before I act.

Yes, I have asymmetric rebalancing bands. If things are going down, then I tend to rebalance into equities on a big down day in the market or the day after.

If things are going up, I tend to rebalance on-the-fly with the dividends paid out every quarter from stock funds. Since mutual funds drop in value when a dividend is paid out, this means that they are held in check on the high side anyways. Or since I need to withdraw from my portfolio, I just sell equities and spend the money. I try to do selling on big up days or on a less-big up day shortly thereafter.

I certainly do not rebalance based on a calendar. So I look often and make decision every day. The decision is usually trivial: "Nothing big happened today, so I will do nothing."

My last major rebalancing into equities was last month when the stock market dropped 5% to 10%.
__________________
LOL! is offline   Reply With Quote
Old 11-23-2014, 09:27 AM   #25
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,616
Also note that the market has to move pretty far to trigger some rebalancing bands since one's portfolio usually is not 100% equities. For example, suppose one is $60K equities and $40K fixed income, then the stock market drops 17% and the bond market stays the same. One might then have $50K equities and $40K fixed income. That means (normallizing back to 100%) one is 56% equities and 44% fixed income.

With a 5% rebalancing band, one would not trigger a rebalancing move, but with a 4% (or 3% or 2%) band, then a 17% market drop would trigger a rebalancing move.

One would need to do the math for their particular ratio of stocks to bonds to see what market activity would hit their personal rebalancing bands.

Also, one can have different rebalancing bands for different subasset classes. For instance, a volatile subasset class such as REITs or emerging markets equities could have higher magnitude trigger points.
__________________
LOL! is offline   Reply With Quote
Old 11-24-2014, 02:06 PM   #26
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Posts: 3,862
I'm all equities. My AA specifies portfolio percentage for each fund/ETF. Any fund that exceeds +/-20% of its target (as in it reaches 6% of the portfolio instead of the 5% target) is bought/sold to return it to the target.


That was supposed to be optimal per William Bernstein, I think, at the time I set up my plan. And once a year was not too bad either. As I remember, it was better to let things ride to reap some benefit from momentum, but not for so long that it they just return to average. And then you want to minimize any transaction costs and tax costs. Not to mention your time. So waiting one year was better than rebalancing quarterly, and 20% triggers were better than 1%.
__________________
Animorph is offline   Reply With Quote
Old 11-24-2014, 02:18 PM   #27
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,846
Quote:
Originally Posted by W2R View Post
My planned asset allocation is 45:55 (equities:fixed).

I rebalance during the first week in January every year, after withdrawing that year's spending money.

Also I may rebalance at other times during the year. According to the plan I wrote down years ago, I should rebalance if my equity balance is off by over 2.5%, that is, less than 42.5% or over 47.5%.
Today's equity portion is 46.68%. Nope, not time to rebalance, yet.
Quote:
Originally Posted by travelover View Post
I wait for a Wheee! signal from W2R.
Ummmm.... did I mention that my portfolio reached another ALL TIME HIGH again on Friday, for the first time since August?

Time to party like it's 2007.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is online now   Reply With Quote
Old 11-24-2014, 02:30 PM   #28
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 8,638
Quote:
Originally Posted by LOL! View Post
Yes, I have asymmetric rebalancing bands. If things are going down, then I tend to rebalance into equities on a big down day in the market or the day after.

If things are going up, I tend to rebalance on-the-fly with the dividends paid out every quarter from stock funds. Since mutual funds drop in value when a dividend is paid out, this means that they are held in check on the high side anyways. Or since I need to withdraw from my portfolio, I just sell equities and spend the money. I try to do selling on big up days or on a less-big up day shortly thereafter.
+1 This is how I approach it. Not a formal, structured approach. Much more ad hoc, but big moves get my attention for both withdrawals and equity buy backs.
__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is offline   Reply With Quote
Old 11-24-2014, 03:00 PM   #29
Thinks s/he gets paid by the post
Huston55's Avatar
 
Join Date: Jul 2011
Location: The Bay Area
Posts: 1,801
I'm glad this post was started because it prompted me to refine our rebalancing policy as part of updating our "Investment Policy Statement." I'd always used "bands" only (+/-5%) during the accumulation phase. But, now that I'm semi-FIREd, I've struggled with how to align AA 'band' rebalancing with annual withdrawals. After reading this Vanguard paper...

http://www.vanguard.com/pdf/icrpr.pdf

...it helped clarify that there is not a huge difference in long term PF performance or volatility whether one uses time or bands. So, given that I have to do something regarding AA each year as part of an annual withdrawal, given that I want to remain relatively close to my selected AA to manage risk and performance and, given that if performance is similar, less churn is better than more churn (taxes, time invested) I've decided to combine the two as follows:

1. Rebalance at the beginning of each year, as part of annual withdrawal for income.
2. Rebalance during the year again only if AA breaches +/-5% bands.
__________________
You may be whatever you resolve to be.
Huston55 is offline   Reply With Quote
Old 11-24-2014, 03:11 PM   #30
Dryer sheet aficionado
 
Join Date: Sep 2012
Posts: 45
I struggled for a time with different rebalancing policies. But, when I simplified my portfolio to a three-fund portfolio, I also decided to simplify my rebalancing policy. As I use ETFs, it is a good idea not to make too many transactions, so I only contribute a few times a year, on a fixed schedule, and fully rebalance at the same time (no bands). It is simple and works for me.
__________________
longinvest is offline   Reply With Quote
Old 11-24-2014, 04:16 PM   #31
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,457
Quote:
Originally Posted by W2R View Post
Today's equity portion is 46.68%. Nope, not time to rebalance, yet.

Ummmm.... did I mention that my portfolio reached another ALL TIME HIGH again on Friday, for the first time since August?

Time to party like it's 2007.
Oh NOOOOOOOOOOO!

Could you wait until Jan 5th before dancing, please?
__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is offline   Reply With Quote
Old 11-24-2014, 05:29 PM   #32
Moderator
MBAustin's Avatar
 
Join Date: Jul 2010
Posts: 4,150
Quote:
Originally Posted by Huston55 View Post
After reading this Vanguard paper...

http://www.vanguard.com/pdf/icrpr.pdf

...it helped clarify that there is not a huge difference in long term PF performance or volatility whether one uses time or bands. So, given that I have to do something regarding AA each year as part of an annual withdrawal, given that I want to remain relatively close to my selected AA to manage risk and performance and, given that if performance is similar, less churn is better than more churn (taxes, time invested) I've decided to combine the two as follows:

1. Rebalance at the beginning of each year, as part of annual withdrawal for income.
2. Rebalance during the year again only if AA breaches +/-5% bands.
Thanks for posting the link to that paper. I've been moving our AA a bit more conservative by swapping out some funds in our tax-advantaged accounts, but once I get it to where I want it, I do need to pay attention to rebalancing.
__________________
"One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute." William Feather
----------------------------------
ER'd Oct. 2010 at 53. Life is good.
MBAustin is offline   Reply With Quote
Old 11-24-2014, 06:34 PM   #33
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,410
Quote:
Originally Posted by audreyh1 View Post
Oh NOOOOOOOOOOO!

Could you wait until Jan 5th before dancing, please?
At least she didn't say the W-word!
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is offline   Reply With Quote
Old 11-24-2014, 06:46 PM   #34
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,846
Quote:
Originally Posted by pb4uski View Post
At least she didn't say the W-word!
I'm being good, honest! Besides, I plan to take my entire 2015 withdrawal during the first week in January and then rebalance - - so I don't want anything to jynx the market before then, either.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is online now   Reply With Quote
Old 11-25-2014, 07:08 AM   #35
Thinks s/he gets paid by the post
Huston55's Avatar
 
Join Date: Jul 2011
Location: The Bay Area
Posts: 1,801
Quote:
Originally Posted by longinvest View Post
I struggled for a time with different rebalancing policies. But, when I simplified my portfolio to a three-fund portfolio, I also decided to simplify my rebalancing policy. As I use ETFs, it is a good idea not to make too many transactions, so I only contribute a few times a year, on a fixed schedule, and fully rebalance at the same time (no bands). It is simple and works for me.
What do you do when there is a significant market swing that causes your AA to deviate beyond your tolerance?
__________________
You may be whatever you resolve to be.
Huston55 is offline   Reply With Quote
Old 11-25-2014, 08:05 AM   #36
Dryer sheet aficionado
 
Join Date: Sep 2012
Posts: 45
Quote:
Originally Posted by Huston55 View Post
What do you do when there is a significant market swing that causes your AA to deviate beyond your tolerance?
I wait until the next scheduled contribution/rebalance date. As a bonus, I have no need to track the market to look for rebalance triggers. That's what works for me.
__________________
longinvest is offline   Reply With Quote
Old 11-25-2014, 08:16 AM   #37
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 8,638
Quote:
Originally Posted by W2R View Post
I'm being good, honest! Besides, I plan to take my entire 2015 withdrawal during the first week in January and then rebalance - - so I don't want anything to jynx the market before then, either.
I just hit an all time high yesterday and have been liquidating 2015 expenses in a drip by drip fashion. Not cheering the year until January.
__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is offline   Reply With Quote
Old 11-25-2014, 08:19 AM   #38
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,457
Quote:
Originally Posted by W2R View Post
I'm being good, honest! Besides, I plan to take my entire 2015 withdrawal during the first week in January and then rebalance - - so I don't want anything to jynx the market before then, either.
Atta girl!

Thanks!
__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is offline   Reply With Quote
Old 11-25-2014, 08:23 AM   #39
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,457
Quote:
Originally Posted by donheff View Post
I just hit an all time high yesterday and have been liquidating 2015 expenses in a drip by drip fashion. Not cheering the year until January.
I have enough distributions coming in to more than cover my Jan withdrawal, so I don't need to sell anything. But I still prefer my fund distributions to pay out when the funds are up!
__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is offline   Reply With Quote
Old 11-25-2014, 08:38 AM   #40
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 8,638
Quote:
Originally Posted by audreyh1 View Post
I have enough distributions coming in to more than cover my Jan withdrawal, so I don't need to sell anything. But I still prefer my fund distributions to pay out when the funds are up!
I probably do as well but the majority are in tax deferred where I reinvest dividends. I make current withdrawals from the taxed account which is 100% equities.
__________________

__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Should you rebalance your retirement portfolio nun FIRE and Money 17 05-16-2011 08:43 PM
Oh Boy your boy Bush and the Nuke triggers to Taiwan. newguy88 Other topics 2 03-26-2008 05:00 PM
Poll: How often do you rebalance your portfolio? Lusitan FIRE and Money 7 05-06-2006 12:51 PM
How Often to Rebalance Portfolio? Gearhead Jim FIRE and Money 7 10-22-2005 10:06 AM
How to rebalance with tax-deferred accounts? soupcxan FIRE and Money 6 11-22-2004 03:06 PM

 

 
All times are GMT -6. The time now is 05:54 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.