tphp99 wrote:So, rebalance is at best a small gamble (I'll not use market timing).
What I don't get is - if I have x amount safely sitting in bonds - why in the world should I put that at risk in stocks? Conventional wisdom says that you should not put money in stocks unless you're willing to lose it all. At least that's how I feel about stocks.
Someone here on this forum said: the money from bonds should cover retirement expenses. Stocks allocation can to zero and that'll be OK.
So maybe my question ought to be: do you rebalance in retirement? That's awfully risky.
If you have enough in bonds or other safe assets, say to fund your minimum required retirement income, there really is no need to rebalance and a perfectly sensible path would be to not rebalance when stocks go down, though you might want to rebalance from stocks to bonds when stocks have gone up. In fact my company 401k was originally set with this as the only way to rebalance.
Depending on how things go this might hurt your returns if we have a large drop followed by a nice recovery, but if you have enough to cover expenses in bonds you will do plenty fine: just try not to sell too much in stocks while they are down and when they recover you will be back to having enough for your discretionary desires. If the market does not bounce back, well you have enough and you will sleep well at night while providing sympathies to other retirees.
I do not think this is a bad approach and may use it myself. In retirement maximizing returns is less important than preserving what you have (especially if what you have is enough).