Year Start Rebalancers

[TromboneAl]

I did my start of the year rebalancing today. Nice to lock in the 15% gain from last year. Of course if I hadn't rebalanced last year, I would have made a few thousand more in 2010.

I went down one percent to a 53% stock allocation.

 

[aaronc879]

When you rebalance, do you take into account that $100K in tax deferred isn't worth as much as $100K in taxable?

 

[Alan]

When you rebalance, do you take into account that $100K in tax deferred isn't worth as much as $100K in taxable?

Too complicated for me (even though I use a spreadsheet to work out the moves) although I can see the reasoning behind it.

Just looked at my current AA and I need to reduce equites 3% and bonds 1.5% to get back to 35/50/15. I'll work on it when I get back from vacation. All the moves will be within the IRA's to avoid taxes.

 

[yakers]

Of course if I hadn't rebalanced last year, I would have made a few thousand more in 2010.

.

I have a problem rebalancing INTO bonds right now. I reduced my AA in bonds in 2010 but stocks did well enough that the AA is a bit out of balance, about 2.5% too high in equities per planned AA. Not sure if it is worth rebalancing and going into bonds just makes me choke. If I could see this as 'locking in' gains and not forgoing gains it would be easier.

 

[79protons]

I am seriously thinking about rebalancing monday. Currently we are 100% equities with about a 26% total return last year. I would like to rebalance to 70% equities and 30% cash, then use 50% of the cash to buy back into the market at a 15% drop and the other 50% to buy back at a 30% drop in the market. I have no interest in bonds (and bonds currently don't have much interest).

 

[growing_older]

That isn't rebalancing. That's market timing.

 

[LOL!]

When you rebalance, do you take into account that $100K in tax deferred isn't worth as much as $100K in taxable?

You must not be from around here, Son. TromboneAl never pays any income tax.

 

[79protons]

That isn't rebalancing. That's market timing.

Yep, and proper market timing is a method Warren Buffett uses to make lots of money. (Buy when others are scared).

 

[LOL!]

If your AA is 60:40 stocks:bonds and you are sitting at 70:30, there is a very easy way of getting back to 60:40 without buying any bonds: Just take the money from stocks and go spend it on something else: new vehicle, more vacations, new body parts, etc.

 

[audreyh1]

I did my start of the year rebalancing today. Nice to lock in the 15% gain from last year. Of course if I hadn't rebalanced last year, I would have made a few thousand more in 2010.

I went down one percent to a 53% stock allocation.

Wait! You are actually going to be doing this Monday, right? Hopefully there won't be big changes and you'll get to "lock in" what you gained last year.

Audrey

 

[growing_older]

and proper market timing is a method

No objection from me. But if you want to do market timing, go ahead and call it market timing. Holding 100% stocks until you think the market might fall, then moving to 30% cash anticipating an opportunity to buy cheaply is not rebalancing.

 

[79protons]

No objection from me. But if you want to do market timing, go ahead and call it market timing. Holding 100% stocks until you think the market might fall, then moving to 30% cash anticipating an opportunity to buy cheaply is not rebalancing.

Ok, I will change the way I worded it then. I plan to rebalance from 100% stocks to 70% stocks and 30% bonds with said bonds paying 0%. If the market drops 15% I will rebalance such that I am still 70% stocks and 30% bonds paying 0%. My term for bonds paying 0% is cash.

 

[TromboneAl]

Wait! You are actually going to be doing this Monday, right? Hopefully there won't be big changes and you'll get to "lock in" what you gained last year.

Audrey

Yes, the change won't take effect until close of trading tomorrow. But I did it today so that a big selloff tomorrow won't scare me out of doing what I've committed to doing, because that would make me a you know what.

 

[JBmadera]

I'm not going to re-balance until I finish Otar's book (Advanced Retirement Planning). He has changed my views on virtually everything related to investing and retirement planning.

 

[Gumby]

I take my investing advice from Will Rogers ("The way to make money in the stock market is to buy a stock. Then, when it goes up, sell it. If it's not going to go up, don't buy it!"), so I'm rebalancing into only stocks that will go up.

 

[Alan]

I'm not going to re-balance until I finish Otar's book (Advanced Retirement Planning). He has changed my views on virtually everything related to investing and retirement planning.

If you are retired, I seem to remember he says the best time to re-balance is once every 4 years during (or is after?) an election year.

He says he has no idea why, except all his test data runs bears this out

PS
I didn't tell you on which 4th year to re-balance so as not to ruin the ending for you

PPS
Come to think of it, that is in his book "Unveiling the Retirement Myth"

 

[JBmadera]

PPS
Come to think of it, that is in his book "Unveiling the Retirement Myth"[/QUOTE]

I read that one first, prompted me to get his newer book.....

 

[Gotadimple]

I take my investing advice from Will Rogers ("The way to make money in the stock market is to buy a stock. Then, when it goes up, sell it. If it's not going to go up, don't buy it!"), so I'm rebalancing into only stocks that will go up.

Sounds like a perfect plan!

Would you like to list those stocks that only go up! Wait! Wait! YOU could write a newsletter.

-- Rita

 

[Nords]

I am seriously thinking about rebalancing monday. Currently we are 100% equities with about a 26% total return last year. I would like to rebalance to 70% equities and 30% cash, then use 50% of the cash to buy back into the market at a 15% drop and the other 50% to buy back at a 30% drop in the market. I have no interest in bonds (and bonds currently don't have much interest).

I take my investing advice from Will Rogers ("The way to make money in the stock market is to buy a stock. Then, when it goes up, sell it. If it's not going to go up, don't buy it!"), so I'm rebalancing into only stocks that will go up.

This thread is worthless without dates.

 

[easysurfer]

I've already set up to rebalance on Monday. I rebalance when my AA drifts 5% or more. My target equities is 51% but is at 56% before rebalancing.

 

[M Paquette]

My policy calls for me to rebalance once a year, if and only if one or more of the investments is outside the +-25% tolerance bands I have set for that allocation, or the cash reserve falls below 1 year's worth.

I just ran the numbers, and I have nothing to do this year. Some stock funds are close to the high end, and some bond funds are close to the low end, so maybe I'll have to do something next year.

I can hardly wait.

 

[Midpack]

I review quarterly, but I don't rebalance unless an asset class gets 5% outside of overall AA target (or 25% off asset class target). An approach that many here probably use. I am usually deploying new cash since we're still working and I probably don't have to rebalance more than annually if that in the long run.

 

[HFWR]

I review quarterly, but I don't rebalance unless an asset class gets 5% outside of overall AA target (or 25% off asset class target). An approach that many here probably use. I am usually deploying new cash since we're still working and I probably don't have to rebalance more than annually if that in the long run.

This is what I use, and one of my funds, PCRIX, is now at 36.6%. Rubber meet road?

 

[kaudrey]

I am a little low on bonds/cash right now but decided that is OK. I am overweighted on foreign funds a bit, but decided to just change my 401(k) allocation out of foreign funds to other things to help them catch up toward my targets. I'll look again at the end of the 1st quarter, and if things are still out of whack, I'll probably move some money out of foreign investments.

I am still working/investing for quite a while, so the added risk of the foreign funds doesn't really bother me.

 

[TromboneAl]

I should probably rebalance less often than once per year, but one gets the itch to "do something" with regard to one's investments, and rebalancing resolves that.

So far today it's looking like I'll get an extra little 1% kick to my locked in gains.

I'm glad to be cutting back my stock allocation, because people's perceptions of the equity outlook is way too rosy.