What triggers your rebalance?

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%.
 
W2R said:
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%.
Click to expand...

Today's equity portion is 46.68%. Nope, not time to rebalance, yet.
travelover said:
I wait for a Wheee! signal from W2R.
Click to expand...

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

Time to party like it's 2007. :dance:
 
LOL! said:
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.
Click to expand...
+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.
 
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.
 
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.
 
W2R said:
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? :D

Time to party like it's 2007. :dance:
Click to expand...

Oh NOOOOOOOOOOO! :mad:

Could you wait until Jan 5th before dancing, please? :facepalm:
 
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Huston55 said:
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.
Click to expand...

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.
 
pb4uski said:
At least she didn't say the W-word!
Click to expand...

I'm being good, honest! :D 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.
 
longinvest said:
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.
Click to expand...

What do you do when there is a significant market swing that causes your AA to deviate beyond your tolerance?
 
Huston55 said:
What do you do when there is a significant market swing that causes your AA to deviate beyond your tolerance?
Click to expand...

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.
 
W2R said:
I'm being good, honest! :D 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.
Click to expand...
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.
 
W2R said:
I'm being good, honest! :D 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.
Click to expand...

Atta girl!

Thanks! :D
 
donheff said:
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.
Click to expand...

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!
 
audreyh1 said:
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!
Click to expand...
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.
 
donheff said:
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.
Click to expand...
I see. We don't have much in tax deferred accounts.
 
Once a year I check to see if anything has moved outside of 75% to 125% of our target allocation. If so, I buy and sell enough to bring allocations within those bands. I also make sure the annual cash reserve I specify in my individual investment plan is adequate, and will sell off assets that are high relative to target allocation to raise cash.

Then I go back to playing with the cats.
 
tuixiu said:
Same. I rebalance once per year in early January, but every time there is a dip in the market I struggle mightily with the urge to buy under the guise of a rebalancing.
Click to expand...

Same here except that I don't pay any attention to market dips. In fact, I don't pay any attention to the market at all. With all this simplicity, I should probably get some cats to play with like M Paquette...

I have been checking my NW as I have a specific soft target for year end and it looks like I'll exceed it. At least as the market stands today.
 
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21 years of ER and counting. Since rocking past 70 1/2 last year my ole buddies at the IRS have be set up at Vanguard to do the RMD automatically and leave the balance in MM.

Re balance is auto also since 2006 when I went Target Retirement.

heh heh heh - Still have 5% or less a few good stocks. Sometimes get a twinge of male hormones and miss the old days when I had a few more funds and did it manually.:nonono: ;)
 
The more I worry about market dips and peaks, the more mistakes I make. I balance yearly.

I have tried taking my yearly allotment out early when the market has been going up, up, up, but that has not proven, so far, to be a winner or loser. So, I may just quit doing it. See my first sentence above.
 
Nothing

If I buy something like S&P 500 index I never sell it. I just collect dividend which I hope will grow from year to year :)
 
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