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Year Start Rebalancers
Old 01-02-2011, 03:06 PM   #1
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Year Start Rebalancers

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.
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Old 01-02-2011, 03:20 PM   #2
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When you rebalance, do you take into account that $100K in tax deferred isn't worth as much as $100K in taxable?
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Old 01-02-2011, 03:43 PM   #3
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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.
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Old 01-02-2011, 03:44 PM   #4
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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.
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Old 01-02-2011, 03:45 PM   #5
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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).
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Old 01-02-2011, 03:50 PM   #6
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That isn't rebalancing. That's market timing.
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Old 01-02-2011, 03:51 PM   #7
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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.
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Old 01-02-2011, 03:51 PM   #8
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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).
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Old 01-02-2011, 03:53 PM   #9
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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.
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Old 01-02-2011, 03:55 PM   #10
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Originally Posted by TromboneAl View Post
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
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Old 01-02-2011, 04:15 PM   #11
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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.
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Old 01-02-2011, 04:29 PM   #12
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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.
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Old 01-02-2011, 05:01 PM   #13
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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.
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Old 01-02-2011, 05:05 PM   #14
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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.
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Old 01-02-2011, 05:10 PM   #15
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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.
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Old 01-02-2011, 05:30 PM   #16
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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

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

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Come to think of it, that is in his book "Unveiling the Retirement Myth"
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Old 01-02-2011, 05:50 PM   #17
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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.....
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Old 01-02-2011, 05:56 PM   #18
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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!

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Old 01-02-2011, 06:12 PM   #19
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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).
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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.
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Old 01-02-2011, 07:31 PM   #20
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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.
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