Jonathan Clements on over-rebalancing

[RetMD21]

Not for everybody but it makes sense to me

I started the year at 78%. Since then, I’ve been regularly moving money from my short-term bond funds to my stock funds, so I’ve not merely offset 2022’s fall in share prices, but also driven my stock holdings six percentage points above my target.....

This isn’t market timing. I’m not making a big all-or-nothing bet based on a market forecast, but rather responding to what the market has already done. Of course, I hope—and indeed fully expect—that the broad stock market will eventually recover its losses and go on to notch new all-time highs. But I have no idea when that’ll happen.

https://humbledollar.com/2022/10/my-investment-sin/

His 86% is too aggressive for my tastes but I am at 80% stocks after increasing my allocation

 

[NW-Bound]

I am greedy, and over-rebalancing is what I have done in the past.

However, I am also a market timer, and I don't think it's time to do that yet. One waits until the sound of wailing and teeth gnashing becomes a deafening uproar.

I still remember how it was in the 2007-2009 Great Recession. If it does not get that bad, it's OK too.

 

[Chuckanut]

I am waiting for W2R to announce that "Stocks are dead!" and that she is now fully invested in discount lunch coupons for various New Orleans restaurants.

 

[NW-Bound]

^^^ You will have to wait a very long time.

W2R will never abandon whatever AA she has chosen. You can't pry the shares of Wellesley/Wellington off her fingers.

 

[Lsbcal]

Peaked at the OP's link:

This isn’t market timing. I’m not making a big all-or-nothing bet based on a market forecast, but rather responding to what the market has already done. Of course, I hope—and indeed fully expect—that the broad stock market will eventually recover its losses and go on to notch new all-time highs. But I have no idea when that’ll happen. That’s why I haven’t made some big onetime shift from bonds to stocks, which is what a market-timer would do. Instead, I just keep buying more as share prices fall, and that’s how I’ve ended up overweighted in stocks.

I would call this a clear example of incremental market timing. Using signals like declining stocks to buy more is just another form of timing.

BTW, I am a proud market timer. I know, I know ... "Pride cometh before a fall" But I do have well documented plans.

If you are a fan of Clements, there will be a full interview with him available later today or tomorrow at:
https://wealthtrack.com/

 

[audreyh1]

You may run out of cash before you can over-rebalance, ha ha.

It’s hard enough catching a falling knife.

 

[Lsbcal]

You may run out of cash before you can over-rebalance, ha ha.

It’s hard enough catching a falling knife.

Ah the falling knife theory. So when does it hit the wood? Does it stick or become a dead cat bounce? Could it become a Schrodenger's cat?

 

[razztazz]

This isn’t market timing. I’m not making a big all-or-nothing bet based on a market forecast, but rather responding to what the market has already done. Of course, I hope—and indeed fully expect—that the broad stock market will eventually recover its losses and go on to notch new all-time highs.

It's market timing for people who need to insist they are not market timing. Even actual "market timers" seldom make all-or-nothing shifts based on some prediction or forecast. They look at what the market is doing or has already done. From that, yes, depending on just what the current state of things is certain forecasts can be made. And "they" or some people, call it market timing.

 

[Lsbcal]

It's market timing for people who need to insist they are not market timing. Even actual "market timers" seldom make all-or-nothing shifts based on some prediction or forecast. They look at what the market is doing or has already done. From that, yes, depending on just what the current state of things is certain forecasts can be made. And "they" or some people, call it market timing.

There are all sorts of market timing methods.

First there are the seat-of-the-pants feel good ideas which are based on hunches. Second there are the all-or-nothing extreme methods. Third there are methods based on what has happened in long term market history. I could go on and on but you get the picture.

And eventually we all must do some trading to spend our money and to respond to life events.

 

[Montecfo]

Interesting how we must disclaim common sense market moves as "Not market timing, I swear!" so s not to risk being labelled as "unclean! unclean!"..... by bogledexers.

kidding, sort of.

 

[NW-Bound]

When you buy the loss leaders that the local markets put on sale, you are "market timing".

When you fill up your car before the hurricane hits, you are "market timing".

When you refinance your mortgage when the interest rate drops, you are "market timing".

When you hold back on buying a new car when the dealership lot has only 2 new cars on it, you are "market timing".

Generally speaking, you are "market timing" when you make a financial decision based on your prognosis of the market condition.

 

[Lsbcal]

Right NW-Bound, we are all market animals whether we like it or not.

 

[NW-Bound]

Right NW-Bound, we are all market animals whether we like it or not.

OK, I've got one poster to agree with me.

Now, there's "good market timing" and "poor market timing". The former one is good, because it makes you money. The latter one is bad, because it costs you money. Duh!

Knowing which is which is the crux of the matter. And you will not make the right decision all the time.

Some people are afraid to make mistakes, or do not want to admit to it. So, they either don't make a choice, or use something else to make the decision for them.

I make a lot of deliberate decisions in my life. And I take full responsibility for making these decisions. Some good, some bad. None has bankrupted me yet, because I never go for broke. I ask myself, if I turn out to be wrong, can it bankrupt me? If yes, I don't go there.

 

[Montecfo]

Right NW-Bound, we are all market animals whether we like it or not.

Hear, Hear!