Join Early Retirement Today
Reply
 
Thread Tools Display Modes
Rebalancing and ensuing mayhem?
Old 01-17-2016, 03:03 PM   #1
gone traveling
 
Join Date: Oct 2015
Posts: 138
Rebalancing and ensuing mayhem?

Long time lurker here, registered as a forum member last year, and today I thought of something to ask. Please, ignore the title of this post - it was only aimed to catch attention...

A thread here about protfolio rebalancing
http://www.early-retirement.org/foru...ges-80386.html

prompted a few thoughts, but I don't seem to be able to arrive at a conclusion. It is mostly because my mind is quite occupied with other things today, so I'd rather ask for opinions from the forum.

Imagine we all somehow decide that January is the best time of the year to rebalance our portfolios, and by chance this coincides with the market tanking.
Meaning that the recent - and ongoing - drop in stocks requires that we buy more stocks.
Let's assume that it is not only us, but the folks over at boggleheads.org have the same routine, as do a bunch of others around the globe aiming for financial independence just like us... Let's say the action is carried out by a few millions of investors at the same time - let's assume during the same week.
Is the market going to notice? How is this going to affect it? Is anyone going to profit from this? Who? How?

Many moons ago and in a different part of the world, my family moved into a condo, and said condos were not built overly soundproof. Some evenings I'd hear a muted banging noise from the floor below, so I investigated and went to ask my neighbors what is happening - it turned out they were just tenderizing some thick porkchops. From that day on, when I heard this noise, I knew what caused it - the neighbors were having at their porkchops... Cause and effect.

So, to reiterate my question: is the market going to notice this noise that we cause with our widely deployed rebalancing, and would it react to it? If so - how?
joylesshusband is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 01-17-2016, 03:08 PM   #2
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,004
The market impact of shares exchanged by individual investors rebalancing their portfolio in January is minuscule and completely insignificant. It's the equivalent of an ant floating on a stick in the Mississippi River wondering if they will need to raise the drawbridge for him.
__________________
Numbers is hard
REWahoo is offline   Reply With Quote
Old 01-17-2016, 03:10 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 38,008
Quote:
Originally Posted by joylesshusband View Post
Long time lurker here, registered as a forum member last year, and today I thought of something to ask. Please, ignore the title of this post - it was only aimed to catch attention...

A thread here about protfolio rebalancing
http://www.early-retirement.org/foru...ges-80386.html

prompted a few thoughts, but I don't seem to be able to arrive at a conclusion. It is mostly because my mind is quite occupied with other things today, so I'd rather ask for opinions from the forum.

Imagine we all somehow decide that January is the best time of the year to rebalance our portfolios, and by chance this coincides with the market tanking.
Meaning that the recent - and ongoing - drop in stocks requires that we buy more stocks.
Let's assume that it is not only us, but the folks over at boggleheads.org have the same routine, as do a bunch of others around the globe aiming for financial independence just like us... Let's say the action is carried out by a few millions of investors at the same time - let's assume during the same week.
Is the market going to notice? How is this going to affect it? Is anyone going to profit from this? Who? How?

Many moons ago and in a different part of the world, my family moved into a condo, and said condos were not built overly soundproof. Some evenings I'd hear a muted banging noise from the floor below, so I investigated and went to ask my neighbors what is happening - it turned out they were just tenderizing some thick porkchops. From that day on, when I heard this noise, I knew what caused it - the neighbors were having at their porkchops... Cause and effect.

So, to reiterate my question: is the market going to notice this noise that we cause with our widely deployed rebalancing, and would it react to it? If so - how?
Far more money is coming into pension funds etc. on the first trading day of the year. Usually Jan 2 or whatever is an up day for equities.

In fact, I suspect the market would not have had that recovery during the last couple of hours of Jan 5 if it hadn't been for the anticipation of new pension money coming in.
__________________
Retired since summer 1999.
audreyh1 is offline   Reply With Quote
Old 01-17-2016, 04:14 PM   #4
Recycles dryer sheets
 
Join Date: Jun 2014
Posts: 440
Yeah I think the more % representative comparison would be ants walking across your neighbours carpet

Sent from my HTC One_M8 using Early Retirement Forum mobile app
petershk is offline   Reply With Quote
Old 01-17-2016, 10:28 PM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Sunset's Avatar
 
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 17,012
Sorry, it's my fault I rebalanced all at once.
I now normally spread it out, ever since that time in 87 on a Monday just before I went on a trip.
Sunset is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Asset Allocation, Rebalancing and Capital Gains ChrisL FIRE and Money 15 09-16-2010 02:45 PM
Rebalancing in a really down market, and long-term effects Telly FIRE and Money 48 03-13-2009 10:03 PM
Rebalancing and Allocation during Accumulation NinjaPigeon FIRE and Money 1 03-08-2007 04:25 PM
More Buckets, Portfolio Allocations, and Rebalancing tomz FIRE and Money 3 10-11-2006 04:25 PM
Accumulation phase and rebalancing Cal FIRE and Money 5 10-13-2004 12:33 PM

» Quick Links

 
All times are GMT -6. The time now is 02:19 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.