chinaco
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- Joined
- Feb 14, 2007
- Messages
- 5,072
This thread is about rebalancing between Fixed and Equity positions in the portfolio.
During the accumulation phase, it makes sense to set those equity positions fairly aggressively and put money in the fixed when there is an equity run up and use the excess fixed to buy equity when the stock market drops. It helps to lockin profits and buy low (without trying to time).
But when one is approaching the draw down phase, some choose a slightly different approach than that used during accumulation.
I am about 3 years from ER. My general plan has been to shoot for a 60/40 mix at age 55. With the 40% fixed used as a pool of money for income. Let the 60% equity grow (over years) and as it grow (one way or another) move some of it to fixed for future income... attempt to replenish the stock/fixed mix (and reduce the equity allocation as we age say 55/45 at 65 and so on). Of course dividends form equity go to fixed first... then sell stock.
But replenishing the fixed allocation would only happen if equities are growing (from stock sales). If the stock market drops, I did not intend to sell stocks in a down market (unless forced to do so). The plan is to have enough fixed to ride out the bad market.
This approach is intended to be a risk management technique to no sell during bad times.
Do you approach rebalancing this way when approaching ER? For example: In our current situation are you holding your equity position and (not buying or selling)... intending to use your fixed for income and wait out the bear?
During the accumulation phase, it makes sense to set those equity positions fairly aggressively and put money in the fixed when there is an equity run up and use the excess fixed to buy equity when the stock market drops. It helps to lockin profits and buy low (without trying to time).
But when one is approaching the draw down phase, some choose a slightly different approach than that used during accumulation.
I am about 3 years from ER. My general plan has been to shoot for a 60/40 mix at age 55. With the 40% fixed used as a pool of money for income. Let the 60% equity grow (over years) and as it grow (one way or another) move some of it to fixed for future income... attempt to replenish the stock/fixed mix (and reduce the equity allocation as we age say 55/45 at 65 and so on). Of course dividends form equity go to fixed first... then sell stock.
But replenishing the fixed allocation would only happen if equities are growing (from stock sales). If the stock market drops, I did not intend to sell stocks in a down market (unless forced to do so). The plan is to have enough fixed to ride out the bad market.
This approach is intended to be a risk management technique to no sell during bad times.
Do you approach rebalancing this way when approaching ER? For example: In our current situation are you holding your equity position and (not buying or selling)... intending to use your fixed for income and wait out the bear?