Good year for equities, time to re-balance?

[Spanky]

Jim Otar says to rebalance every 4 years after the Presidential election with some supporting data to show it is the best approach. YMMV

Okay, that's what Omar said. What do you say? Is it whatever what Omar says?

 

[LOL!]

I remember reading that. He made a good case for it.

I don't think he made a good case. Wasn't it just fortuitous that a couple of the best rebalancing times occurred in those years. Remove those 2 data points and there is no case. Maybe even remove one data point and there is no case.

 

[ETFs_Rule]

After 2013 being a banner year for equities (20+ % in my case) I am now at roughly at 63%/37% equities/bonds (~5% cash not included). Since my planned and actual AA a year ago was a 55-60%/45-40% range, I am wondering if it is time to do a 6 percent (or so) re-balance or just let it be. (Age 58, retired and not getting any younger).

I'm 48 and positioned in 87% stock ETF's, 10% gold and 3% cash that I play around with 3X leveraged ETF's. Sometime in early 2014 I will be shifting 10% into bonds as a hedge against a stock market correction.

 

[photoguy]

I don't think he made a good case. Wasn't it just fortuitous that a couple of the best rebalancing times occurred in those years. Remove those 2 data points and there is no case. Maybe even remove one data point and there is no case.

I agree. It's very easy to come up with spurious correlations especially when there's no real logical reason for the decision rule.

 

[HFWR]

I've seen it opined that there is no rebalance "bonus", but I don't have that info at my fingertips...

 

[NW-Bound]

It does not pay to rebalance during a long secular market rise like in 1980-2000, if one knew that secular rise in advance.

Rebalance works darn well in the 2000-2013, but not if one does it on a fixed day of the year. He would miss the big market troughs in March 2003 and March 2009. Better do it by % of asset imbalance.

 

[Lsbcal]

It seems everyone wants to tell about their rebalance philosophy ... including me, I fear.

 

[NW-Bound]

It's not a philosophy, it's a religion.

I am an atheist or at least an agnostic, in both religion and investing.

Having an unshaken belief in some rules does keep things simple. However, I see life as complicated and not obeying simple rules.

 

[Lsbcal]

Good thoughts NW-Bound.

When it comes to investing I've tried to be a complete pragmatist. If it will make me money over the longish run and is completely legal, I just might do it. I don't care if it's market timing or buy-hold, just has to work.

 

[NW-Bound]

Whatever makes money makes me feel good. I just wish I could be right all the time.

 

[RunningBum]

It seems everyone wants to tell about their rebalance philosophy ... including me, I fear.

That is the thread topic, isn't it? The OP asked if it was time to rebalance. There is no provable correct time. Therefore, most of us gave our own philosophy. The OP gets the advice he paid for. I'm wondering what kind of posts your are otherwise looking for?

 

[Lsbcal]

That is the thread topic, isn't it? The OP asked if it was time to rebalance. There is no provable correct time. Therefore, most of us gave our own philosophy. The OP gets the advice he paid for. I'm wondering what kind of posts your are otherwise looking for?

I'm just making an unnecessary observation. Don't mind me.

 

[prototype]

That is the thread topic, isn't it? The OP asked if it was time to rebalance. There is no provable correct time. Therefore, most of us gave our own philosophy. The OP gets the advice he paid for. ...

I appreciate all the input people have provided to my OP. Lots of good info and food for thought. I'll probably just wait 2 months and go with my January re-balance (if still needed). That gives me time to see what kind Financial Plan Vanguard provides based on my goals and "my risk/comfort level" (since I'm eligible for a free ones and have never used this service). Yes, I'll have a grain of salt or two handy.

 

[tuixiu]

I'm a January rebalancer as well, for some reason glad its coming soon.

January works for us because there is always a slight change in the norm since some of the usual automated monthly buys (we're in accumulation phase) are halted to instead put the max into my Roth IRA in January and wife's in February. Depending on how out of wack things are might not transfer any funds at all, instead changing monthly buy AA to compensate over the ensuing year.

 

[ziggy29]

It seems everyone wants to tell about their rebalance philosophy ... including me, I fear.

I don't think there's one right way to rebalance. It's just important that you use objective, measurable criteria to trigger a rebalance... and do it.

 

[audreyh1]

FWIW - a lot of rebalancing occurs naturally for me in December. That's when most of my equity funds pay out distributions, and I let them go to cash. In a better stock year, the capital gains distributions tend to be higher, so stock funds get trimmed more.

Then I finish the rebalancing in January when I take my withdrawal and clean up the chaos left by the year-end distribution party.

 

[SJ1_]

After 2013 being a banner year for equities (20+ % in my case) I am now at roughly at 63%/37% equities/bonds (~5% cash not included). Since my planned and actual AA a year ago was a 55-60%/45-40% range, I am wondering if it is time to do a 6 percent (or so) re-balance or just let it be. (Age 58, retired and not getting any younger).

We are 25% equities.
we have re-balanced a number of times.
Ton of CD's
and some Bonds

The most stocks we have had in last 10 yrs was 35% .

It works for us

 

[RobLJ]

Okay.......

I use 25% rebalance bands, so, e.g. a 5% allocation can vary between 3.75% and 6.25% before needing to be adjusted. This keeps me from trading too actively. Still not sure why picking a random day to rebalance back to your "ideal" allocation is any better, but to each his/her own.

This is a different but just as rational rebalancing discipline as a yearly or semi-annual or bi-annual date. I allow 5% over target, so I'm like you. I'm willing to cheat a little if sector is in a hot momentum swing up, but I'll pull the trigger if it moves back down over a month. Markets can stay irrational longer than you can stay sane. I'm letting biotech continue to run, for example--if it goes down 5% that reduces the two year gains to 105% rather than 110%.
Mini-timing.
YMMV--I've used this for the last 10 years and it's worked fine for me.

 

[HFWR]

This is a different but just as rational rebalancing discipline as a yearly or semi-annual or bi-annual date. I allow 5% over target, so I'm like you. I'm willing to cheat a little if sector is in a hot momentum swing up, but I'll pull the trigger if it moves back down over a month. Markets can stay irrational longer than you can stay sane. I'm letting biotech continue to run, for example--if it goes down 5% that reduces the two year gains to 105% rather than 110%. Mini-timing. YMMV--I've used this for the last 10 years and it's worked fine for me.

Used to rebalance at +/- 10%, but found, particularly during the Great Recession, that during massive swings I was losing upside, and catching falling knives on the downside...

Plus, it's all part of my "don't just do something, stand there" philosophy.

 

[audreyh1]

Used to rebalance at +/- 10%, but found, particularly during the Great Recession, that during massive swings I was losing upside, and catching falling knives on the downside...

Plus, it's all part of my "don't just do something, stand there" philosophy.

+1 - but I just (almost) doubled my "out of range" limits to reduce the rebalancing frequency.