Originally Posted by LOL!
It seems to me that lots of folks hang tough when the market is down, but many don't rebalance into the things that have dropped. A target retirement fund or a balanced fund like Wellesley or Wellington will do that for them without them even knowing it.
Either that, or you do it yourself. Bonds, US stock, Int'l stock, Small, Large, whatever category, it doesn't matter. Just sell what you strictly need, and sell whatever is at its highest point relative to your target asset allocation.
Such reverse rebalancing is such a simple rule, and yet it should work beautifully in the long run, while avoiding to get emotions and gut feelings mixed in the process. In addition, if you do a full rebalancing, you'll buy other categories at a low point, and be very happy in the long run.
Now why do people keep large pockets of cash instead of just using such a rebalancing procedure? Beats me.
Disclaimer: I'm not retired yet, so... although such approach makes 200% sense to me, I've never used it for real, so... what do I know...