January Reblancers Thread

[TromboneAl]

I had a happy rebalancing experience. I did it on Monday the 4th, so I had a nice 1.6% increase in my stock funds on that day. That is, the sale occurred at the end of the trading day, so I got the benefit of that day's increase. There haven't been any big up days after that.

I was able to lock in the gains on the money that I rebalanced into stocks last year.

 

[audreyh1]

I was able to lock in the gains on the money that I rebalanced into stocks last year.

Yeah - that was a good feeling!

(I rebalanced on 8/09 when my equity allocation reached 10% out of balance)

Audrey

 

[W2R]

Any comments from the early January rebalancers after the fact?

I'm still figuring......

Audrey

This was the first time that I ever tried a withdrawal and rebalancing all at once, and I did it late at night on impulse. I wanted to move my entire year's withdrawal into savings. Then I could move 1/12th of it from savings to checking each month. And then, I would not include the withdrawal in my rebalancing since anything in the bank is just there as spending money. I thought this would be simpler to just balance the nestegg comprised of my taxable, Roth, and TSP accounts until I am a seasoned retiree.

I feel pretty stupid. I goofed a little... that is, instead of 45% equities, I am now 45.5% equities. Apparently I used a figure for the withdrawal that was off when computing how much of each fund to sell. Other than cash everything else is proportioned correctly.

So, I guess I will let it ride. If the market drops, I'll be perfectly balanced. I did withdraw the right amount. And I really do have more cash, even though it is set aside for spending.

It was interesting to sell equity funds for the first time. I had no idea that I would get a message saying essentially, "OK, THAT'S IT!! You can't sell this fund again until March!!!!" But that's ok. Just surprising.

 

[TromboneAl]

I feel pretty stupid. I goofed a little... that is, instead of 45% equities, I am now 45.5% equities.

Yes, I think your entire retirement plan is now doomed. Back to work for you!

I calculated things to end at 54% equities, but the next day it was 54.6%. I'm guessing this was due to the 1.6% rise in the S&P that day.

I set it to end up with a year's worth of expenses in the money market, which is tied to my Vanguard Advantage checking, and the remainder went into a bond fund.

 

[Alan]

I feel pretty stupid. I goofed a little... that is, instead of 45% equities, I am now 45.5% equities. Apparently I used a figure for the withdrawal that was off when computing how much of each fund to sell. Other than cash everything else is proportioned correctly.

0.5% is not goofing, it is fine tuning. I shouldn't worry about such small miscalculations, you'll be closer next time.

 

[W2R]

Yes, I think your entire retirement plan is now doomed. Back to work for you!

EEEYAAAAAAAAAAGHH!!! Not me!

I calculated things to end at 54% equities, but the next day it was 54.6%. I'm guessing this was due to the 1.6% rise in the S&P that day.

You know, I'll bet that is what happened!! WHEW. I didn't think about that. I did my computations and juggling around early in the morning of January 1st, but didn't feel like staying up later to doublecheck. Maybe the market shifted on January 4th, when I got around to checking. Gosh, you'd think they'd keep things nice and still while newbies like me got the hang of rebalancing!

I set it to end up with a year's worth of expenses in the money market, which is tied to my Vanguard Advantage checking, and the remainder went into a bond fund.

I have money in Vanguard Prime MM, and should probably look into the Vanguard Advantage checking, which I don't have. But then, it's comforting to have my year's spending money in a brick-and-mortar bank where I can pound on somebody's desk if I need to. I am sure that as time passes, I will become braver about these things.

0.5% is not goofing, it is fine tuning. I shouldn't worry about such small miscalculations, you'll be closer next time.

Thanks. Sometimes I have to fight overly perfectionistic tendencies, and I guess I let them get the better of me! I feel better now that I have got that imperfect rebalancing performance off my chest.

 

[audreyh1]

I feel pretty stupid. I goofed a little... that is, instead of 45% equities, I am now 45.5% equities. Apparently I used a figure for the withdrawal that was off when computing how much of each fund to sell. Other than cash everything else is proportioned correctly.

Well, actually you can't ever get it exactly right!

You calculate the allocation based on one day's fund values - say 12/31/09.

But when you actually do the selling and buying, it's going be based on the fund values for the NEXT TRADING DAY - in this case 1/4/09.

If the day is a big market move day - and Jan 4 was (S&P500 up 1.6%) - you can easily end up off by 1%.

There is no way to nail it perfectly.

And by the way - the next trading day - it's off even more!

Audrey

P.S. I see TromboneAl already explained it!

 

[W2R]

Thanks - - I feel a lot better after listening to you, Alan, and T-Al. You're right. I guess I was just stressing out over it. One would think I was still at w*rk, getting that wound up over something this trivial.

 

[audreyh1]

Yeah - I hate rebalancing on days that the market makes some huge move (>2.5% or more) because I know all my trims and adds are going to be off!!!!

But in the end it doesn't even matter a hoot, because the markets are going to just keep a-changin' every day!

Audrey

 

[easysurfer]

Yeah, the markets are going to keep changing every day. So, after the reblancing, if my AA are within the 5% I target, I consider that rebalanced.

 

[Alan]

Yeah, the markets are going to keep changing every day. So, after the reblancing, if my AA are within the 5% I target, I consider that rebalanced.

Absolutely agree. I didn't even bother rebalancing this time as I was only 0.5% out. I had rebalanced earlier when I was more than 5% out.