Had to rebalance for the first time

[NW-Bound]

I also drew from my tax-deferred stash for the 1st time ever, just recently when I got to 60. My earned income stopped just 5 years ago, but then I have no pension.

I think I will be rebalancing stock/bond/cash into consumables more than anything else from now on.

 

[Live And Learn]

I found myself to be overweight in small/ midcap stocks so I re-balanced by selling selling enough to buy a new car.

Yes, I did the same - only my overweight position went into a small boat.

I just want to point out to the OP that your stated variance of 10% is actually 20%...

It is +10% to - 10%.... so, if your band is a 20% range then great... otherwise you need to narrow it to +5% to -5%....

Correct - my band is 20% (it WAS 10% but when I hit 55% equities I decided to let it ride, thereby increasing my overall band from 10% to 20%). This will ensure I take advantage of fire sales, which I hope we don't experience again for a long time !

 

[RobLJ]

I was more active from early '07 to '09 than at any other point. In late '06 I got concerned both about housing and about turning 50 in two years while I had a 90/10 allocation--so I sold stock mutuals for about a year from mid '06 to '07 and bought bond funds to get to 65-30-5. Then in Oct '07 I got concerned about a crash and the fact that the bond funds I bought were an intermediate (corporate and goverment note), so changed 70% of the bond allocation to govt intermediate (the note fund went to PIMCO Real Return).

Then during the crash, in early '09 I bought small positions in Canadian funds, China, gold miners, and some more of my core funds, but it was less painful to just increase my monthly purchases more to stock funds. At the end of the year, I started moving the intermediate fund to TIP, a high yield, and floating rate fund, and a foreign market bonds and bought back China and biotech.
I was lucky--most of those turned out well, save for a early (and luckily) small move into an Energy Services fund that was creamed.

From then until 2011, I pretty much just let things sit, but sold some of the stock fund gains in 2012 and 2013 to stay close to my 65-30-5 allocation.

Rebalancing in a crash now, without the monthly contributions will be much harder, I think.

I did manage to rebalance in 2008, early 2009. It was very tough. I remember looking at my portfolio in Jan 2009, and the only way I was able to rebalance was because I could see I would have 10 year of expenses still in fixed income after rebalancing. That was the only way I could bring myself to do it. And the market took another nasty dive into March of 2009! Fortunately, that was the bottom.

 

[audreyh1]

I'm not sure if this is unusual, but it does feel like it after reading forum posts. I'm in the accumulation (started full time career in 1998) phase with an 80/20 AA and I've never had to rebalance by selling. Each month I make contributions based on where they are needed to maintain target AA. Market swings haven't exceeded what I can make up for with contributions. Even during 2007-2009. Currently, my contributions are about .5% of portfolio value although back then my contributions were a much. larger percentage.

Yes, when you are in accumulation mode (not retired) you can rebalance by buying, although once your nest egg gets large enough it's hard to keep up that way.

 

[RonBoyd]

What’s the ‘Long Run’ for Investing? Longer Than You Think - The Experts - WSJ

There are certain truths that are etched into the brains of investors. They know that in the long-run, their portfolio returns will be close to the historic average of the stock market. In the short-run, they know that returns will fluctuate wildly. However, many investors have an unrealistic idea of when the short-run ends and the long-run begins. My clients are often stunned when I tell them that in the stock market, five years is a short-term time horizon.

 

[target2019]

I'm not sure if this is unusual, but it does feel like it after reading forum posts. I'm in the accumulation (started full time career in 1998) phase with an 80/20 AA and I've never had to rebalance by selling. Each month I make contributions based on where they are needed to maintain target AA. Market swings haven't exceeded what I can make up for with contributions. Even during 2007-2009. Currently, my contributions are about .5% of portfolio value although back then my contributions were a much. larger percentage.

It's unusual insofar as you and others who work are in a pool of retirees in this forum. New contributions make a huge difference. Last year I was able to funnel new money into international, and it kept the AA pretty much in balance. On a yearly basis for 10 years, maxing 401k and Roth means 25k approximately, so quite a nice amount of new money to Rebalance with.

 

[NW-Bound]

... Each month I make contributions based on where they are needed to maintain target AA. Market swings haven't exceeded what I can make up for with contributions. Even during 2007-2009. Currently, my contributions are about .5% of portfolio value although back then my contributions were a much. larger percentage.

In 2009, there was a poster who said he had a 7-figure loss, of course all due to stock drop. He was already retired, but it would be hard for a worker to come up with new money to buy stocks to rebalance. If someone had such a high income, then his portfolio loss would be in the 8 figures.

I have not had the chance to lose $1M, not even when converting my loss in 2000-2003 to today's dollars to account for inflation.

 

[panacea]

Still working so most of our retirement savings is in 401(k) plans, which are set to automatically rebalance. I let the IRAs and after-tax accounts drift quite a bit more but nothing that will get us in too much trouble. It's probably about 10% over our equity target in those accounts but I'm in no hurry to do anything about it given that it's only about 30% of our portfolio. We add to these account in chunks, so if the market is high I tend to buy a bit more short term tax-exempt bonds and if the market dips I'll buy either a total stock mkt index ETF or Tech ETF depending on which is more beat up.

 

[audreyh1]

In 2009, there was a poster who said he had a 7-figure loss, of course all due to stock drop. He was already retired, but it would be hard for a worker to come up with new money to buy stocks to rebalance. If someone had such a high income, then his portfolio loss would be in the 8 figures.

I have not had the chance to lose $1M, not even when converting my loss in 2000-2003 to today's dollars to account for inflation.

I think there was a pole, and there were actually several forum members who reported 7 figure losses during the 2008/2009 crash.

 

[travelover]

I think there was a pole, and there were actually several forum members who reported 7 figure losses during the 2008/2009 crash.

As I recall, it was a Czech who took that poll.

 

[eryx]

It's unusual insofar as you and others who work are in a pool of retirees in this forum. New contributions make a huge difference. Last year I was able to funnel new money into international, and it kept the AA pretty much in balance. On a yearly basis for 10 years, maxing 401k and Roth means 25k approximately, so quite a nice amount of new money to Rebalance with.

I guess if one had their investment types spread out across the various withdrawal accounts, then one could use withdrawals for balancing AA. But in order to do that, the setup possibly wouldn't be maximizing tax efficiency regarding the investments being placed into the "best" location.

 

[Live And Learn]

I guess if one had their investment types spread out across the various withdrawal accounts, then one could use withdrawals for balancing AA. But in order to do that, the setup possibly wouldn't be maximizing tax efficiency regarding the investments being placed into the "best" location.

Yes, my "plan" was to use withdrawals to rebalance. However this year and next year I will be receiving distributions from deferred bonuses during my w*rking years. The distributions plus dividends in my taxable account nearly cover my expenses, which is why I didn't deploy the methodology in January. In 2019 I plan to use an annual withdrawal to rebalance. By then my taxable income with be low enough to allow me to take advantage of a 0% tax rate on Cap Gains (unless that law is changed) in which case I will also do some tax GAIN harvesting, selling enough to not impact my taxes for the year and then immediately rebuying the same stock. For tax loss harvesting the new investment must be "substantially different" but (as far as I know) this does not apply to gains.