What are your rebalance triggers?

[SecondCor521]

If stocks are dropping rapidly, and you are rebalancing often, your fixed income will shrink rapidly too. At some point you may face whether you have enough fixed income left to get you through a few years if things don’t recover quickly - unless you are employed in which case it doesn’t matter.

Maybe play the Oct 2007 to March 2009 scenario and see what happens with your rebalancing system.

Thank you, audreyh1.

I am a new FIREee, having left my job in the fall of 2015 and officially retired in February 2016. In the 2008/2009 downturn I was 100% stocks (I went to 90/10 in June 2016). I held on and during the worst of it considered finding a way to buy more, since I didn't believe that it was different that time. But, I was employed, which obviously makes a huge difference.

Since retiring at a market high, I've watched the market go up another 25-30%. It is better to be lucky than good, of course.

In my FIRE strategy, in the case you outline, my living expenses would also be dropping quickly, so my "years-of-expenses-in-bonds" would stay at least a little more stable than "amount-in-bonds".

I also do not follow a bucket strategy, so I withdraw from my portfolio and rebalance to my AA regularly. So in the situation you describe, depending on the relative performance of stocks and bonds, you could say that I would be withdrawing from stocks for living expenses. Another way to say it is that I look at "years-of-expenses-in-FIRE-stash", not "years-of-expenses-in-bonds".

Also, my net WR is about 1.3%, so I feel pretty safe at that level. Actually trying to spend a little bit more currently.

But again, I do want to make sure you know that I appreciate the comment, because it made me think and review my situation and make sure I at least think I know what I am doing and have considered all of the ramifications. I think I have, but it is always good to double check, especially for an early FIREee.

 

[scrabbler1]

One can look back just 2 years to see what happened when markets were down about 20% and more from their highs. Does anybody even remember? I suppose we could look back at discussions we had back then to see who was buying equities in acts of rebalancing.

I made a small rebalancing move in my IRA in early January that year, from bonds to stocks. At least, that's what I though I did. But when I got the confirmation in the mail, I realized that I had made the move in the opposite direction by mistake! I then made a move in the intended direction (bond->stock) for twice the original amount. To my pleasant surprise, I actually came out ahead from my mistake because I bought more stock at a lower price than I had sold by mistake a week earlier. On the bond side, the NAV was virtually the same. I made about $800 due to the mistake.

 

[kgtest]

since I am in accumulation phase, 30% of my net new income comes in end of February. This is usually a good opportunity for me to re balance. I also re balance again right after DIV payments in early December. I sort of let it ride through the summer not to be bothered too much...maybe not a great approach.

50% Large, 25% Mid 25% Small is my target. It's been working out well.

Since I am 100% equities, I dont think we consider this a re balance though lol.


I guess per that VG PDF I used the combined Time and Threshold approach.

 

[W2R]

I have two triggers.

1.) First week in January, after withdrawing the year's spending money.

And,

2.) Equity allocation strays by over 2.5% from my planned 45:55 AA (that is, less than 42.5% or over 47.5%)

 

[Major Tom]

IIRC, I have not purposely re-balanced so far. In this bull market we've been having, my end-of-year sales of a few equities to provide income has had the effect of moderating my stock allocation somewhat. However, even with these transactions, the raging bull market has caused my stock allocation to become quite high. I should possibly re-balance, but am rather averse to doing so. It's the same inertia and mild lack of interest that will most likely prevent me from selling when the next inevitable downturn occurs.

If this rager of a market were to continue for another year or two, I could possibly see myself re-balancing. I'm casually sanguine about the whole thing though, because if my equity allocation gets a little too high, all it means is that if/when a correction occurs, I will simply have to ignore my portfolio even more, by concentrating (even more) on my wonderfully relaxing everyday life.

I guess what I'm saying is that I'm not really bothered if my allocation gets out of whack, because I'll still own a bunch of equity and bond funds, and as long as I hang onto them, things will be OK.

It's called a lazy portfolio for a reason

 

[4legsgood]

Sometimes panic...sometimes greed .

 

[LOL!]

I made about $800 due to the mistake.

Those are the best kinds of mistakes.

 

[Lsbcal]

Because of the Great Depression numbers I've seen, I rebalance only to maintain my risk level. I only rebalance if equities are 1% above my target.

Many here think they have been tested in a severe market. But markets can go to much lower levels then 2009 (or even 1973-74).