audreyh1
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I forgot to mention the active rebalancing. I did mention that any selling to cover expenses would be from the fixed side, but many would be actively rebalancing as well.
I didn't do much, but in OCT 2008, I moved 5% of my portfolio from bonds to SPY, at $89.41. SPY went lower, but was back to that level about 7 months later, and is now at $274 (not counting divs, lost a little of that to the lower divs vs bonds).
So yes, doubling my money in 10 years (adjusted for BND/SPY total return), even though I didn't get the timing even close to perfect, is pretty sweet.
-ERD50
That is a big part of what is so scary about rebalancing in a situation like late 2008, early 2009. You know you might need that fixed income portion to live off for many years, yet here you are selling a big chunk to buy stocks that might continue to drop. How many times are you willing to dip into your fixed income to buy stocks if they continue to drop? I finally resolved this by setting a minimum # of years of expenses (after tax) in fixed income. I rebalanced three times while stocks were crashing.
I think many folks didn’t rebalance “near the bottom” for this reason. It’s very scary. It was psychologically very difficult for me to do that last rebalance.
The market recovered much faster than I expected after Q1 2009. Extraordinary measures were taken to stabilize the damaged financial system and avoid a death spiral of bank failures, frozen credit, layoffs, bankruptcies and foreclosures (corporate and individual), and money market funds breaking the buck. It might have taken much longer to recover.
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