What are you rebalancing now?

[gcgang]

I've heard a well diversified portfolio always has something that's down, or at least has underperformed.

I know my gold/commodities has sucked, and suspect EMequity has also lagged of late. Don't know whether I have the stomach to add to g/c, but that's probably when I should.

Some of you have great command of asset class performance. What do you use to concisely find performance, and how do you decide to rebalance?

 

[OldShooter]

We'll look at rebalancing during the week after Christmas, like we always do. Some years we even make a trade or two as a result. Usually we don't see a need however.

 

[Oz investor]

i am a portfolio tinkerer preferring to add ( rather than swap ) , so i aim for the NEXT trend ( where sensible )

currently i am looking for boring ( fair value ) defensive stocks ( dental stocks , small consumer staple companies , etc. ) but not to the exclusion of other under-valued stocks ( and property trusts ) .

 

[Dtail]

International Equities (Index) has been my main drag this year, but was great last year.
Keeping to my allocation range of 15-25%.

 

[corn18]

I am a boglehead so just have index funds. US equities are blazing right now so I changed all my 401k contributions to go into bonds. International is also lagging but I’ll wait and fix that with my year end rebalance.

That’s about it. Pretty boring. Just the way I like it.

Don’t just do something, stand there!

 

[street]

^ I like that. I don't rebalance and seem to do better just standing there! LOL

 

[VanWinkle]

I have added slightly to international to maintain 20% of stocks in international stocks. I invested some mad money into the foreign stocks as it was just sitting in my file drawer earning zip.

 

[LOL!]

I have a set number of asset classes that I own. I don't have to look at esoteric or new asset classes at all in order to check their performance.

I can use Morningstar.com to check the performance of any ticker symbol over any time range. I can use Microsoft Money to check the actual personal performance of anything that I own over any time range. The Fidelity Analysis tab which is a rendition of the Morningstar.com Portfolio X-ray will tell me exactly what my asset allocation actually is. Other brokers have similar tools.

So those are the tools I use. For buys/sells and rebalancing moves, I describe them all in real-time in http://www.early-retirement.org/forums/f44/lol-s-market-timing-newsletter-57042-88.html

Your idea that EMequity has lagged of late is not quite correct. It went up about 5% in the last few weeks, but has since dropped again. You missed a chance, but there will be another one.

I use two methods to decide when/how to rebalance:

1. I use rebalancing bands of about 5%. The tools I noted tell me if I am out of band.

2. In addition to rebalancing bands, I will buy into something temporarily if that something has a huge one-day drop. My intention after such a buy is to sell it within a week or so.

 

[copyright1997reloaded]

Haven't done much, which has been good. My prediction from February (that the market would hit new highs before year end) has come true, and once the late Jan highs were taken out I think we continue to move higher. Here's a graph I shared in June (updated with current prices) where I babbled on about breaking out of the wedge and just needing to get through the late Jan/early Feb quick downdraft. thinkorswim Sharing

Anyway, now the 2875 SPX ceiling is a floor. Honestly, I wish the market would rest a bit here, perhaps even test the 2875 breakout. We are up 9.71% YTD on SP 500 (SPY), and over 20% on a 1 year basis. My 'fear' is that there are a lot of fund managers and people who sold bunches of things earlier this year and are worried about not being fully invested as we go towards year end. So, we might end up getting a melt UP over the next few months. (Some of this likely depends on what is happening in the midterm elections.)

For example, my largest single stock holding is Apple (AAPL). I am a very long term holder in Apple, and hold I never have to sell it. It has had a GREAT year, and as I type this up 34.6% YTD. But I am starting to get nervous about it as it appears it is starting to go parabolic on the upside:
thinkorswim Sharing. Don't get me wrong, I think Apple is worth $250 here - just to get a forward 12 month PE that maps to the SP 500. I just am fearful when things happen too fast and too quickly.

ETA: Hit enter too soon. So, even though I think we have a good short term risk reward ratio here (keep going up), I think I should start looking for things to trim.

 

[audreyh1]

I’m not out of bounds enough to rebalance anything right now, but if things continue as they are come Jan I expect I’ll be adding to international and bonds.

 

[Dtail]

I have a set number of asset classes that I own. I don't have to look at esoteric or new asset classes at all in order to check their performance.

I can use Morningstar.com to check the performance of any ticker symbol over any time range. I can use Microsoft Money to check the actual personal performance of anything that I own over any time range. The Fidelity Analysis tab which is a rendition of the Morningstar.com Portfolio X-ray will tell me exactly what my asset allocation actually is. Other brokers have similar tools.

So those are the tools I use. For buys/sells and rebalancing moves, I describe them all in real-time in http://www.early-retirement.org/forums/f44/lol-s-market-timing-newsletter-57042-88.html

Your idea that EMequity has lagged of late is not quite correct. It went up about 5% in the last few weeks, but has since dropped again. You missed a chance, but there will be another one.

I use two methods to decide when/how to rebalance:

1. I use rebalancing bands of about 5%. The tools I noted tell me if I am out of band.

2. In addition to rebalancing bands, I will buy into something temporarily if that something has a huge one-day drop. My intention after such a buy is to sell it within a week or so.

Do you use 5% for each asset class or just the entire portfolio? I just started using the methodology of 5% entire portfolio, but 25% for each class. Swedroe's 5/25 rule?

 

[sengsational]

I just sold a bit of US equities and REIT. I didn't/don't look up any perform by asset class. Instead, I just take a current snapshot of all of my holdings. I have a spreadsheet where each holding has it's own allocation across 9 or so asset classes. So the REIT fund I just sold a bit of has 100% in the REIT/gold column, a balanced fund would be spread across bonds, US equities, EM, etc. The point is, since I have these allocations defined for each holding, I can enter the total of each position and see exactly what my AA is across all holdings, all institutions. Then it becomes a juggling act to try to put everything in the middle of the band without breaking the institution/tax boundaries, and not complicating things any more than they already are, hehe!

 

[SecondCor521]

I use Quicken and Excel to check my asset allocation. I usually check it a few times a week just out of interest.

I require that I rebalance when my asset allocation gets out of whack by more than 2 percentage points, but if I'm feeling overly attentive about it I allow myself to rebalance to my AA for smaller deviations. Surprisingly I've done very tiny rebalancing moves seven times this year. Currently my AA is 91/9 and I'm at 91.48/8.52. I rebalance inside my traditional IRA between Vanguard mutual funds, so zero cost other than a little bit of my time.

 

[LOL!]

Do you use 5% for each asset class or just the entire portfolio? I just started using the methodology of 5% entire portfolio, but 25% for each class. Swedroe's 5/25 rule?

You mean if I have 15% in US small-cap stocks, do I use 5% of 15% or do I use 5% of 100%?

First, let me say I wrote "about 5%", so it is never exactly 5%.

Second, for bonds I use about 5% of entire portfolio. And for all equities, I use about 5% of all portfolio. These trigger bands are essentially never reached because they are too wide and other rebalancing on-the-fly happens continuously when I reinvest dividends, withdraw money, or do the huge-drop-buying thing.

So the Swedroe 5/25 bands would probably have one only rebalance in 2002, 2009 and never again since.

Third, the huge-drop-buying thing forces one to buy low and there are triggers say 0 to 4 times a year. To undo the huge-drop-buying thing, the rebalancing on-the-fly continuously when I reinvest dividends or withdraw money takes care of that, but I suppose the 5% of total portfolio could also trigger selling some equities.

Fourth, studies on rebalancing are just bunk in my opinion because they test one type of rebalancing against another. For example, calendar rebalancing versus 5/25 rule. They don't test a combination of rules. I think combinations of rules are the way to do rebalancing.

Fifth, I would like to rebalance at the low of each year or two and I would like to rebalance at the high of each year or two. I think it is probably impossible to get the timing of rebalancing perfect, so close enough works for me. Did you see that August 15, 2018 was a 52-week low for some asset classes?

 

[jimbee]

I rebalance in late December, when I do my Roth IRA conversion. My investment policy statement also includes rebalance triggers at 5%, but I haven't hit those since I started doing my annual Roth conversions.

 

[Dtail]

You mean if I have 15% in US small-cap stocks, do I use 5% of 15% or do I use 5% of 100%?

First, let me say I wrote "about 5%", so it is never exactly 5%.

Second, for bonds I use about 5% of entire portfolio. And for all equities, I use about 5% of all portfolio. These trigger bands are essentially never reached because they are too wide and other rebalancing on-the-fly happens continuously when I reinvest dividends, withdraw money, or do the huge-drop-buying thing.

So the Swedroe 5/25 bands would probably have one only rebalance in 2002, 2009 and never again since.

Third, the huge-drop-buying thing forces one to buy low and there are triggers say 0 to 4 times a year. To undo the huge-drop-buying thing, the rebalancing on-the-fly continuously when I reinvest dividends or withdraw money takes care of that, but I suppose the 5% of total portfolio could also trigger selling some equities.

Fourth, studies on rebalancing are just bunk in my opinion because they test one type of rebalancing against another. For example, calendar rebalancing versus 5/25 rule. They don't test a combination of rules. I think combinations of rules are the way to do rebalancing.

Fifth, I would like to rebalance at the low of each year or two and I would like to rebalance at the high of each year or two. I think it is probably impossible to get the timing of rebalancing perfect, so close enough works for me. Did you see that August 15, 2018 was a 52-week low for some asset classes?

My example was if one has 20% in small cap, then the bands would be 15-25%.
I see your other points and am continuing to gather info on rebalancing or effectively in this example asset class rebalancing.
Thanks.

 

[copyright1997reloaded]

So, I was going to buy some emerging market today and possibly sell a little large cap US. But, I got busy working on wood and forgot about it!

No rush I guess as it doesn't look like the downtrend on VMO/EEM is over, and while the China trade issue continues I'm guessing these will continue to struggle (China is 31% of the MSCI Emerging Markets Index). But I would like to start nibbling at it.

 

[W2R]

I’m not out of bounds enough to rebalance anything right now, but if things continue as they are come Jan I expect I’ll be adding to international and bonds.

+1

My financial plan that I worked out for myself in the early 2000's, wrote down, and now stick to like glue, dictates a 45:55 AA (equities:fixed).

As equities rise, dividends and capital gains on everything keep churning out cash, which is still in my portfolio and helps buoy up the non-equity part too.

As of this morning my equities fraction is 45.6%. Close enough. If it was below 42.5% or above 47.5% then I rebalance. I also rebalance during the first week of January (right after withdrawing the entire year's spending money), whether it needs it or not.

My international funds are not doing well, so if/when I rebalance I'd be buying international and bonds like Audreyh1. I'd use some of the temporary excess in cash from yields to do it.

 

[gayl]

I'm really bad at least .... just sold SPY to dump more into worldwide equity index & small caps. But I was overweighted

 

[HI Bill]

I know my gold/commodities has sucked, and suspect equity has also lagged of late. Don't know whether I have the stomach to add to g/c, but that's probably when I should.

Rebalancing assumes that you have a good porfolio mix of investments, and the right (or reasonable ones for you). For me, holding gold/commodities are not, and never will be, a part of my portfolio. Gold rarely outperforms the S&P 500 over the long-term. A few years ago, airlines were buying oil futures, and some made money, and some lost. Individual commodities are risky, as you don't know when which will be down or up. Individual mutual funds may lag or lead the indices. I only hold ETFs and mutual funds. I throw out the losers, if they consistently underperform the market (I had Vanguard Windsor II and Wellington in the late 1990s, and they did not make any money, a decade later), so I traded them for something that did.

That said, people are now afraid of stock market near-highs, and are looking for safety. My international funds have almost never outperformed US funds, and chances are, when the US economy tanks, international economies will also (IMHO/unfounded prediction). Just thoughts, with no real solutions, other than to consider your asset allocation, and evaluate whether you're in the right stuff.

 

[cyber888]

Stopped contributing to high growth large cap stocks end of this month, and just focus on the S&P500 index for my 401k. But I'm still 90% in stock as equities have ways to go before hitting a peak. Eventually, all these trade wars will end before the end of this year, and will keep the stock booming for awhile.

 

[pb4uski]

I use Quicken and Excel to check my asset allocation. I usually check it a few times a week just out of interest.

I require that I rebalance when my asset allocation gets out of whack by more than 2 percentage points, but if I'm feeling overly attentive about it I allow myself to rebalance to my AA for smaller deviations. Surprisingly I've done very tiny rebalancing moves seven times this year. Currently my AA is 91/9 and I'm at 91.48/8.52. I rebalance inside my traditional IRA between Vanguard mutual funds, so zero cost other than a little bit of my time.

Same here... I have a Quicken portfolio value report that I copy and paste into an Excel workbook and a summary sheet draws off that data and gives me an analysis of how I stand vs target. I can then simulate the impact of transactions and rebalance... usually all in my tIRA to avoid tax implications. I did a small rebalance a week ago and another back in late June.

 

[RobLJ]

I do the same (I copy the new values into last year's workbook, with labels as to the category of fund and allocation percentages and then run an Excel Pivot table based on the categories, so I get a total of money/percentage allocated to each subcategory.)
I'll probably have to add to international, bonds, and value in February. I've already taken some gains in Fidelity Contra, Biotech, and small growth to cash, to build up 4 years of withdrawals.

Same here... I have a Quicken portfolio value report that I copy and paste into an Excel workbook and a summary sheet draws off that data and gives me an analysis of how I stand vs target. I can then simulate the impact of transactions and rebalance... usually all in my tIRA to avoid tax implications. I did a small rebalance a week ago and another back in late June.

 

[gcgang]

Trimming some stocks. I've found my smallest winners seem to be Drug, ConsumerStaple, and Telecom. All have nice dividends, but something's got to go.

Also, going to let about 10% of my MSFT and 1/3 of DE get called.

TBills here I come.

 

[pb4uski]

Most recently sold domestic equities and bought international and emerging market equities.... but fairly small amount in the whole scheme of things... less than 1% of total.