BeachOrCity
Full time employment: Posting here.
- Joined
- Jun 1, 2016
- Messages
- 892
Want to end up ahead of where you were on feb 15th? Stick to your rebalancing strategy!
While many of us know this, keep in mind the simple math of all of this as you decide your actions in coming weeks and months.
Simple example:
100k portfolio 50/50 stocks bonds pre crash.
(Assume bonds are flat and you spend your dividends going forward.)
Market crashes 50%. You now have 25k stocks and 50k bonds.
You rebalance to 37.5k stocks and bonds each. Your portfolio is now 50/50 again. But you are 25% down not 50%.
Stocks recover which means they gain 100% to get back to where they were before the crash.
You now have 75k stocks and 50k bonds
You rebalance to 62.5k stocks and 62.5k bonds.
Thru all of this up and down your portfolio grew 25%! But the stock market was FLAT.
Just keep this in mind when you are making decisions during these difficult times!!!!
While many of us know this, keep in mind the simple math of all of this as you decide your actions in coming weeks and months.
Simple example:
100k portfolio 50/50 stocks bonds pre crash.
(Assume bonds are flat and you spend your dividends going forward.)
Market crashes 50%. You now have 25k stocks and 50k bonds.
You rebalance to 37.5k stocks and bonds each. Your portfolio is now 50/50 again. But you are 25% down not 50%.
Stocks recover which means they gain 100% to get back to where they were before the crash.
You now have 75k stocks and 50k bonds
You rebalance to 62.5k stocks and 62.5k bonds.
Thru all of this up and down your portfolio grew 25%! But the stock market was FLAT.
Just keep this in mind when you are making decisions during these difficult times!!!!