When you have enough?

[jazz4cash]

I check my balance every day .. and assess when I need to change my asset allocation every 2 - 4 weeks .. depends on whether the stock market is over-heated or there's a big dip.

How do you assess whether the market is over heated and what counts as a big dip?

 

[OldShooter]

I check my balance every day .. and assess when I need to change my asset allocation every 2 - 4 weeks .. depends on whether the stock market is over-heated or there's a big dip.

WADR, @cyber888, I think you are trading based on noise. Here is a chart I use in my Adult-Ed investing class to illustrate the concept:

​

DW and I look somewhat seriously at our portfolio annually during the week between Christmas and New Year. Maybe one year out of three a trade results. Two or three years ago we decided to go from 60/40 to 75/25. This year we may look at our TIPS holdings; as we age we have fewer future years where we need inflation protection.

I do see account balances monthly when I reconcile statements in Quicken but that never results in any action.

 

[RunningBum]

WADR, @cyber888, I think you are trading based on noise. Here is a chart I use in my Adult-Ed investing class to illustrate the concept:

​

That looks like the kind of chart where short term rebalancing would give awesome results. Short term rebalancing can hurt you in long drops or gains, where you keep selling stocks as the market continues to rise, or sell all the way down in a drop. But in your chart, you would likely sell at near one of the many spikes up , and buy near the bottom of the frequent drops.

There's no way your chart is realistic, btw. The market goes up 20% and then drops 30% in the same week, and has similar volatility almost every week for 6 months? When has anything close to this ever happen?

 

[OldShooter]

... There's no way your chart is realistic, btw. The market goes up 20% and then drops 30% in the same week, and has similar volatility almost every week for 6 months? When has anything close to this ever happen?

Oh, it's a simulation. Showing real market behavior in the class would bring in too many other factors.

The points I make are:
1) It's easy to get lucky. There is enough noise that someone is always going to get lucky and brag online. The traders that guess wrong don't post.
2) It's crazy to look daily or even weekly; all you are seeing is noise. The market signal may take a year or more to see. I did just find a good online article on this subject: Are You Checking the Portfolio Too Often? — Investment Masters Class

Re short term rebalancing, it always looks easy in the rear view mirror. I don't know of any research supporting the idea that it works, however. Do you?

 

[daylatedollarshort]

For those worried about future stock market returns, the Bogleheads wiki has some good tip on matching strategies which is an investment model for retirement planning not using stocks or mutual funds. It might be hard to implement fully now with TIPS rates so low, but still might be food for thought.

 

[RunningBum]

Oh, it's a simulation. Showing real market behavior in the class would bring in too many other factors.

The points I make are:
1) It's easy to get lucky. There is enough noise that someone is always going to get lucky and brag online. The traders that guess wrong don't post.
2) It's crazy to look daily or even weekly; all you are seeing is noise. The market signal may take a year or more to see. I did just find a good online article on this subject: Are You Checking the Portfolio Too Often? — Investment Masters Class

Re short term rebalancing, it always looks easy in the rear view mirror. I don't know of any research supporting the idea that it works, however. Do you?

No, I don't know of any such research, but if I were trying to convince someone not to do short term rebalancing the last thing I'd show them is a concocted chart that shows a near perfect case for doing short term rebalancing.

 

[OldShooter]

No, I don't know of any such research, but if I were trying to convince someone not to do short term rebalancing the last thing I'd show them is a concocted chart that shows a near perfect case for doing short term rebalancing.

Well, we can differ on whether the chart is a "perfect case" or not, but my audience is at the point where they're a little fuzzy on basic concepts. No chance that tactical rebalancing is in their vocabulary.

 

[big-papa]

If anybody's interested, siamond over on bogleheads just did a rebalancing study. Based on lots of questions, he is continually updating his spreadsheet, but lots of good info on the blog whose link is in the first entry in the thread below.

https://www.bogleheads.org/forum/viewtopic.php?f=10&t=322344&p=5421447

 

[RunningBum]

Well, we can differ on whether the chart is a "perfect case" or not, but my audience is at the point where they're a little fuzzy on basic concepts. No chance that tactical rebalancing is in their vocabulary.

This audience isn't your class.

 

[OldShooter]

This audience isn't your class.

It is so predictable, even funny, that you always have to have the last word. So go ahead. I'm done.

 

[Steeler75]

Well if your shares were in Sears for example that money isn’t coming back.....

How we prepare for it and the various calamities that we may face is the question? Not a “prepper” living in a bunker but I am sure those folks have a different attitude than most, so we all need to find that level of preparedness that makes...

I prepare for the next bear by not dripping but accumulate dividends in cash. When the next bear comes out of the cave (or black swan), that’s when I put the cash to work. That’s what I did in Feb and March, and what I plan to do going forward. AA In equities is a bit higher now but not out of my zone to sleep well at night.

 

[OldShooter]

Well if your shares were in Sears for example that money isn’t coming back ...

Well, there are many ways that foolish investing can hurt a portfolio. Lack of diversification is one of the more popular.

William Bernstein: “Do you think that by choosing a portfolio of only a few stocks that you hope will score big, you are maximizing your chances of becoming wealthy? Indeed you are, but you are also maximizing the chances of a retirement of cat food cuisine”
​

We own (literally) all the tradeable stocks in the world. I suppose Sears Holdings was in there somewhere but I haven't noticed.

 

[cyber888]

How do you assess whether the market is over heated and what counts as a big dip?

I know when Tech stocks go up $150 to $200 in one day. and when the market loses 800 points in one day (then I buy).

 

[hanginthere]

The Duchess of Windsor said "You can never be too rich or too thin" You can tell most of the forum contributors are mainly baby boomers who have "made it". Unfortunately we live in a society motivated by envy, some of which is justified. When a large portion of the population finds itself in insurmountable debt they may never get out of, its easy to see how they might sucumb to a party that promises to take from the more fortunate and redistribute it directly or indirectly to them. On a practical note, diversification does not mean different equity categories. Would suggest 40-40-20 equitys-bonds(t bond govt wont default)-cash plus about 10%metals(take delivery) and maybe even a very small portion in bitcoin. Works for me.