Is doing nothing a bad strategy

[street]

I have another question some of you will shake your head at me. Lol In the good time or bad times through the years I never re-allocated from stocks to bond or bonds to stocks. I suppose I could be way better off today if I would have changed things up but I just kept buying and never adjusted anything. In my over all portfolio I'm sitting at 70/30 and I don't feel comfortable changing and messing with my accounts.

So how bad of thing is it not to change things up or am I losing by not doing it?

 

[pb4uski]

While I'm a little anal about rebalancing, as I recall portfolio survivability does not differ much between 70/30 or 60/40 or 50/50 so I can think of much worse mistakes that you could make.

 

[Aiming_4_55]

Well, stay the course may not be all bad at 70/30. You have cost of inflation if assets sits in cash. That is limiting potential loss for the time being on the bright side. I'll avoid the cost of opportunity viewpoint.

I am still working and have rentals, so I sit on a fair amount of cash. If I have a bad day/week and quit or have a major repair, I have options. I sleep better at night for that.

Key question - Were you able to sleep at night?

 

[NW-Bound]

If you do something, and it does not work out, do you hate yourself?

Many people are afraid to make a decision, so either do nothing or let someone else make the choice for them (like an FA).

The above said, if you do nothing, you will still be fine at 70/30.

 

[REWahoo]

In my over all portfolio I'm sitting at 70/30 and I don't feel comfortable changing and messing with my accounts.

How will you feel when (not if) the market takes a big dive and that 70% number decreases by 20% or more? Only then will you know if "doing nothing" was a problem.

 

[6miths]

Well if you have consistently stayed at 70:30 by buying whichever brings you back to that ratio then you are rebalancing. Just doing it by buying what you are underweight in. If that is happening then you are probably doing better than 95% of people. Even if you just started 70:30 and did nothing (assuming you are keeping costs low) then I agree with pb4uski that there are way worse things that one could do.

 

[NW-Bound]

How will you feel when (not if) the market takes a big dive and that 70% number decreases by 20% or more? Only then will you know if "doing nothing" was a problem.

Or if the market gets into a bubble phase, does the OP kick himself for bailing out too soon?

 

[RobbieB]

I love doing nothing, it's one of the secrets of my success.

 

[ERD50]

While rebalancing sounds like a good approach, some studies show it really doesn't help, and may hurt.

In a long bull, you are selling on the way up. And it isn't always made up on the way down.

That is, if by 'doing nothing' you meant not rebalancing? Or did you mean not straying from 70/30? Either way will likely work the same over the long run. Don't sweat it.

-ERD50

 

[street]

I was almost afraid to ask this question and have read so many posts on re-balancing. I bought monthly for 35 years and always have been on the risky side. There has been bad times in the market in the 35 years and yes I lost my behind but it always came back and I never really worried about it. I have mentioned before that I don't rely on these stock funds to live on and may never have to ever use this money.

It does make me feel a lot better from your reply's. I suppose I could be worth more if I would have done things different but in the end I really didn't have to do any better because it ended up I have more then I need. I have been very fortunate and lucky in life.
Thank you again for the help and all the knowledge you people have. The funny thing about money is I hate to deal with it and have no desire to be a financial person.

 

[audreyh1]

I have another question some of you will shake your head at me. Lol In the good time or bad times through the years I never re-allocated from stocks to bond or bonds to stocks. I suppose I could be way better off today if I would have changed things up but I just kept buying and never adjusted anything. In my over all portfolio I'm sitting at 70/30 and I don't feel comfortable changing and messing with my accounts.

So how bad of thing is it not to change things up or am I losing by not doing it?

The only rule might be that if the equity market does take a big dive, you should be psychologically prepared to rebalance back to 70/30. Do you think you could do that?

If instead you still "do nothing" and leave it alone letting the allocation go to wherever. Well - like others say, one can make far worse investing mistakes.

BTW - I didn't do any rebalancing until I was retired as I was pretty much all equities, most of it company stock - and just got started diversifying at all just a year before retiring. During accumulation phase (and while you are still working!) it often pays off to be aggressive.

 

[ER Eddie]

Doing nothing does have the advantage of being easy.

Good to read the responses. I was wondering about this myself (how important rebalancing was).

 

[GoodWishes]

We are more in the do nothing camp and we have done very well. There is no guarantee formula. Do what you are comfortable with that work for you.

 

[FireBug]

I think the key phrase of your post is "through the years". If indeed this has been a consistent philosophy over a long-ish period of time and your 70% has been spread or indexed across a relatively broad spectrum of equities.....I'd say GOOD FOR U

 

[brucethebroker]

We can give you a better answer to today's question in 5 years....check back then....
haha!

 

[FANOFJESUS]

Or just buy a fund that keeps you balanced.

 

[marko]

"Just don't do something..Stand there!" (Warren Buffet?)

I tend to be very long term with a pretty good tolerance for volatility. As such I usually don't really re-balance as much as wait for a major drop to scoop up opportunities.

 

[NW-Bound]

Well, a retiree who no longer has earned income must sell high in order to have money to buy low.

 

[Montecfo]

For folks with long time horizons, 100% equities is historically the highest return choice, as long as:

1. You maintain adequate emergency cash and
2. You have the strength of will to not sell equities when the market sells off.
3. Better yet, if you have idle cash, redeploy it after a big selloff.

 

[LOL!]

I think 70/30 and staying put is an excellent idea. You have probably done better than most folks who try to get fancy.

But ...

There can be reasons to do something:

1. Get out of high fee and high expense-ratio funds.
2. Get out of tax inefficient funds.
3. Stop paying any advisors if you are paying them.

I have less than 30% in bonds myself and I am retired.

 

[Mdlerth]

I suppose I could be worth more if I would have done things different but in the end I really didn't have to do any better because it ended up I have more then I need.

+1

This is wisdom. Once we grasp this, all the controversies about AAs, FAs and SWRs pale into insignificance.

Obi-Wan has taught you well.

 

[marko]

Well, a retiree who no longer has earned income must sell high in order to have money to buy low.

Or has cash set aside knowing such days do arrive.

 

[euro]

I love doing nothing, it's one of the secrets of my success.

+1 for that!

 

[CRLLS]

WRT rebalance, my rep at Fido and I talked about this. He was in the rebalance camp. I am in the Steady-as-she-goes camp. He either ran some evaluation or referenced some article, I can't seem to remember. It seems that, over the long term, there was no discernable difference in performance. However, there were larger deviations in the "stay-put" plan. If you need money in the near future, maybe within a 5 yr window (my number) rebalance would be possibly beneficial. Long term 20 yrs or more, I'd stay put.

Even at 64 yrs old, I still am planning for the long term, out to age 100. So, WTH, I am staying with the non-rebalance plan. That is largely due to other income that will cover the large majority of my nut. And I don't believe in chasing a moving target. I might think differently if I was counting on the investment for my essential expenses.

 

[Chuckanut]

IMHO, one of the benefits of having a fixed AA and rebalancing every year, or when things really go TILT!, is that it gives us a way to handle a bear market without panicking and doing something really stupid.

Say the market takes a 20% beating later this year, without a rebalancing plane some people will panic and sell into the down market thus locking in their losses. OTOH, the man or woman with a plan can rebalance and say to oneself - well, I have done what is necessary in a down market, now it's time for a good night's sleep.

It all depends on our individual temperaments and attitudes towards money, investing, risk, etc. And even our spouse who may need to know that you've done something to save the farm.

Or just put most of the money into the PSSSSSSTTT.... Wellesly Fund and let them rebalance for you.