Rebalancing 2018

[Dawg52]

Took care of some minor shuffling this morning. My AA remains conservative.

 

[LRDave]

Procrastinators that were planning on rebalancing out of equities but didn't get to it before COB won today....

 

[HMMY]

I changed my allocation from 70/30 to 55/45 in August and reallocated for tax efficiency (fixed income into tax deferred) in preparation for ER. I checked today, but my 5% bands have not been triggered, so no need to rebalance.

 

[NW-Bound]

Procrastinators that were planning on rebalancing out of equities but didn't get to it before COB won today....

But if they still hold the stocks, tomorrow is another day.

Some of my stocks got an 8-9% jump today. Will they hold tomorrow? Don't know, but am just glad I did not write call options on too many of them.

PS. Time for another piece of music.

And don’t speak too soon
For the wheel’s still in spin
And there’s no tellin' who that it’s namin'
For the loser now will be later to win
For the times they are a-changin​

 

[audreyh1]

Up 8 to 9% TODAY? - wow!

 

[rayinpenn]

Thanks for bringing it up maybe I’ll rebalance for the first time in quite a while...

 

[NW-Bound]

Up 8 to 9% TODAY? - wow!

In case you are curious, here's the top one on my list: CLF, a US steel company who has been in hard times. I have only 0.3% of portfolio in it as a lark. Its forward P/E is too low to resist. Even with the 9.57% pop today, I am just breaking even on this position.

Some other positions, I have more of. And so, my stash is up 1.57% today, beating even Nasdaq which was up 1.5% (S&P at 0.83%), even though I am only 70% in stock.

But again, it can all go away tomorrow. Bob Dylan already warned me of this.

 

[DEC-1982]

Put in the order yesterday for the annual withdrawal, and subsequent re-balance.

 

[Montecfo]

Also I'm targeting absolute $ amounts, not %, and I feel the $ amount of stocks is about right, but I need a lot more $ in cash+bonds. I feel I need to get cash+bonds up to about 5-8 years of spending, and it's much less than that now.

If you are comfortable with the equity exposure, I think this makes some sense. In essence, you are saying your cash/bond allocation should be $Z, set to your planned spending ("$x") times Y years, Y being the number of years you expect it to take stocks to recover from a large selloff or bear market.

Could be a higher return approach than a fixed percentage, without sacrificing safety.

 

[Mo Money]

Montecfo: +1

I am 80/14/6, but the 14/6 is enough for me to live at my current level for about eight years in a downturn -- i.e., more than I need as a buffer in a mega-depression. I may slowly allocate a bit more to cash if the market continues to climb. But the markets, like the rest of life, are cyclical....

 

[43210]

Also I'm targeting absolute $ amounts, not %, and I feel the $ amount of stocks is about right, but I need a lot more $ in cash+bonds. I feel I need to get cash+bonds up to about 5-8 years of spending, and it's much less than that now.

If you are comfortable with the equity exposure, I think this makes some sense. In essence, you are saying your cash/bond allocation should be $Z, set to your planned spending ("$x") times Y years, Y being the number of years you expect it to take stocks to recover from a large selloff or bear market.

Could be a higher return approach than a fixed percentage, without sacrificing safety.

Right. It's the plan I talk about in my thread
http://www.early-retirement.org/for...ash-bonds-if-the-rest-is-100-stock-90041.html

In the long run stocks outgrow cash/bonds. Naively one might think just go 100% stocks.

But once you're in a situation where spending>income, as is typical post-retirement (including income to be zero for me post-retirement), you have to plan for near term spending, up to 5 years, maybe even 10 years in the future, you don't want most of that "near-term" money in stocks, as you don't want to be forced to sell low. The safe investments bucket is based on near-term spending needs, rather than a % of portfolio.

 

[audreyh1]

All done.

 

[NW-Bound]

It's not all done for me.

Several out-of-the-money call options become in-the-money, meaning if the stock prices hold until Jan 19, I will "lose" these shares and the other side of the trade may be happy (or not).

Other options are getting close. For example, one ETF option with a strike price of $155 is getting close, with the ETF trading above $150 now.

Well, I already placed my bets, so will sit back and see what happens. I have seen stock prices coming 180-deg around and whiplashing these options to oblivion. This is far more interesting than going to Las Vegas. Even a quick play takes 1 or 2 months to play out, but I am patient. Plus it leaves me time to play with my electronics.

 

[Ronstar]

Assuming that the present value of an annuatized annuity is considered cash, then I'm
Stocks 45.9%
Bonds 40.7%
Cash 12.6%
Misc 0.9%

Stocks and bonds were equal about 6 months ago - now a 5% stray - but I'm going to let this AA ride

 

[Spanky]

our current AA:
stock 53.79%
bond 33.25%
cash 12.96%


Plan to reduce cash to 2% and increase bond holdings.

 

[W2R]

I rebalanced on the 1st before noon. Vanguard couldn't do anything until the 2nd, naturally, but I was glad to have finished doing it. It's so simple, and yet can be so stressful for some of us. I checked and everything is fine. After closing today, instead of 45:55 I have (45.30) : (54.70) due to another day of market advances. Good enough.

 

[Moemg]

I have been waiting until after my RMD's on Jan. 5 to rebalance .So far it has worked to my advantage .

 

[kgtest]

I rebalance in November. Too many procrastinators, money managers and RMDrs taking profits, losses, and such on either side of the new year.

Is rebalancing easier or more difficult POST ER and why?

 

[W2R]

I rebalance in November. Too many procrastinators, money managers and RMDrs taking profits, losses, and such on either side of the new year.

Is rebalancing easier or more difficult POST ER and why?

For me, it just is what it is. Whether before or after ER, I always rebalance ASAP in the New Year as my financial plan directs. I also rebalance if/when my equity allocation goes below 42.5% or above 47.5%. Having these two rules defining when I rebalance helps to keep me from being tempted to market time.

It's never been easy for me, because rebalancing requires juggling around relatively large amounts of money, and I don't often do that. The feeling is similar to my feeling when taking a large cashier's check from my real estate closing to my bank when I sold my house (2 years ago). Kind of nerve-wracking. I was relieved to have that check deposited and to see it show up in my bank account later that day.

Similarly, now I am relieved to be done with my annual rebalancing and to see that I didn't mess up and that what I see in Vanguard online is what I intended to see - - a 45:55 AA that is now subject to the usual minor daily variations, not a 97:03 AA or something unintended like that due to some error or other.

 

[easysurfer]

I scheduled all my rebalancing on 12/30, since that was a Saturday and processing wouldn't happen until 1/2. Checked today, and everything got moved fine. Not too bad. I only rebalance once a year, so I'm all set til 2019.

 

[NW-Bound]

Market advanced some more today, pushing more of my covered-call options into the money.

Stocks up 1.20%. Minus loss due to options, and diluted by MFs and cash, portfolio up 0.78%.

Still waiting for the shoe to drop, to borrow from Live and Learn. Any day now, I guess.

 

[W2R]

Market advanced some more today, pushing more of my covered-call options into the money.

Stocks up 1.20%. Minus loss due to options, and diluted by MFs and cash, portfolio up 0.78%.

Still waiting for the shoe to drop, to borrow from Live and Learn. Any day now, I guess.

Tomorrow, plummeting down 20% and more. Just kidding.

Seriously, the Dow only increased 99 points today (out of nearly 25,000). It's always going to go up, or down, sometimes 2 figures like this, and sometimes even 3.

Edited to add: I was staring at this and wondering if the Dow had ever gone up by 4 figures. Finally I just had to look it up. The largest one day increase in the Dow was 936.42 points on 10/13/2008. The largest one day decrease in the Dow was 777.68 points on 9/29/2008. What a volatile year that was!!

https://en.wikipedia.org/wiki/List_of_largest_daily_changes_in_the_Dow_Jones_Industrial_Average

 

[audreyh1]

If the idea of rebalancing is to reduce the loss if the market drops, then it works for me. In 2017, I picked up an extra 2% return selling options that mostly expired worthless.

If the market drops big, then that 2% would not be enough. If one anticipates that, then severely reducing stock AA would be the only thing that could help. I may still do that tactical AA if things start to look bad.

I meant the kind of rebalancing where people sometimes claim that "the market rebalanced for me" meaning that equities dropped and got them back to their target allocation. Which is not rebalancing of course. They didn't rebalance when their equities or whatever were high, so they lost the opportunity.

I thought you were making a similar remark:

I wrote several call options with Jan 19 expiry.

If those stocks keep on going, somebody will buy these shares from me at even higher prices than now. That will trim my AA.

If the market bombs, I still have the shares, but the stock AA also gets trimmed due to price dropping.

 

[DEC-1982]

All done.

Me too.

At some point I will go to a single fund and avoid the re-balancing task. The unfortunate part of a single fund is that withdrawals then come from both stocks and bonds instead of just the better performing fund, but the simplicity will outweigh the advantage at some point/age. Also, you lack more granular control over the equity/income split in a single fund, but I expect that's also OK at some point/age.

 

[audreyh1]

Me too.

At some point I will go to a single fund and avoid the re-balancing task. The unfortunate part of a single fund is that withdrawals then come from both stocks and bonds instead of just the better performing fund, but the simplicity will outweigh the advantage at some point/age. Also, you lack more granular control over the equity/income split in a single fund, but I expect that's also OK at some point/age.

Yeah - I’d rather use multiple funds. What I suspect will happen when I don’t want to deal with rebalancing anymore is I’ll just stop rebalancing and let the funds run on their own. Taking distributions in cash. Should be good enough.