Asymmetric Rebalancing: What and Why?

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magician
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Re: Asymmetric Rebalancing: What and Why?

Post by magician »

grayfox wrote:
magician wrote:
grayfox wrote:Rebalancing to a constant mix is not the only dynamic strategy. See the 1994 paper Dynamic Strategies for Asset Allocation by Andre F. Perold and William F. Sharpe.

Another method described in the paper is simple Buy and Hold, i.e. no-rebalancing. In Figure 4, Buy-and-Hold is shown to be superior to Constant Mix in trending markets.

Sharpe won a Nobel prize, so I would give some weight to his ideas. In my opinion, unyielding dogmatism about one strategy or another is not helpful.
I recall writing that somewhere, probably in the Do You Rebalance? thread.
Yes, I was going to simply quote your post from that thread, but I didn't want to post your quote out of context and drag you into it.
You're amazingly thoughtful!

(I think that there's a way to link to a specific post within a thread, but I don't recall how to do it; If I had, I'd have done so here, rather than linking to the entire thread.)
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Re: Asymmetric Rebalancing: What and Why?

Post by FillorKill »

grayfox wrote:
magician wrote:
grayfox wrote:Rebalancing to a constant mix is not the only dynamic strategy. See the 1994 paper Dynamic Strategies for Asset Allocation by Andre F. Perold and William F. Sharpe.

Another method described in the paper is simple Buy and Hold, i.e. no-rebalancing. In Figure 4, Buy-and-Hold is shown to be superior to Constant Mix in trending markets.

Sharpe won a Nobel prize, so I would give some weight to his ideas. In my opinion, unyielding dogmatism about one strategy or another is not helpful.
I recall writing that somewhere, probably in the Do You Rebalance? thread.
Yes, I was going to simply quote your post from that thread, but I didn't want to post your quote out of context and drag you into it.
One of my favorite papers.... :happy

Unfortunately the constant mix drum beat drowns-out most else in these threads.

As my portfolio has evolved I find myself considering strategies that offer more downside protection [and not merely the 'buy more bonds' variety] as that is becoming more important. I've warmed-up to CPPI over the years [I make changes at glacial pace - no moves imminent...] but the mechanics of that will never pass muster here as the strategy appears anathema to the typical advice. ie you may find yourself selling into a decline and buying into a rally. I don't even want to start that argument - I don't have the energy to defend it here.

CPPI participates in the equity upside and protects the downside despite the inherently counterintuitive mechanics executing the strategy requires.

Will I ever implement it? Hard to say but [along with some other strategies that protect the downside] it is under consideration.

The bottom line - constant mix offers little downside protection unlike CPPI and that can be an increasingly important distinction for some of us.
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Re: Asymmetric Rebalancing: What and Why?

Post by umfundi »

BBL wrote:
grayfox wrote:
magician wrote:
grayfox wrote:Rebalancing to a constant mix is not the only dynamic strategy. See the 1994 paper Dynamic Strategies for Asset Allocation by Andre F. Perold and William F. Sharpe.

Another method described in the paper is simple Buy and Hold, i.e. no-rebalancing. In Figure 4, Buy-and-Hold is shown to be superior to Constant Mix in trending markets.

Sharpe won a Nobel prize, so I would give some weight to his ideas. In my opinion, unyielding dogmatism about one strategy or another is not helpful.
I recall writing that somewhere, probably in the Do You Rebalance? thread.
Yes, I was going to simply quote your post from that thread, but I didn't want to post your quote out of context and drag you into it.
One of my favorite papers.... :happy

Unfortunately the constant mix drum beat drowns-out most else in these threads.

As my portfolio has evolved I find myself considering strategies that offer more downside protection [and not merely the 'buy more bonds' variety] as that is becoming more important. I've warmed-up to CPPI over the years [I make changes at glacial pace - no moves imminent...] but the mechanics of that will never pass muster here as the strategy appears anathema to the typical advice. ie you may find yourself selling into a decline and buying into a rally. I don't even want to start that argument - I don't have the energy to defend it here.

CPPI participates in the equity upside and protects the downside despite the inherently counterintuitive mechanics executing the strategy requires.

Will I ever implement it? Hard to say but [along with some other strategies that protect the downside] it is under consideration.

The bottom line - constant mix offers little downside protection unlike CPPI and that can be an increasingly important distinction for some of us.
Interesting. I searched the site and could not find any discussion of CPPI. Has there been such a discussion? I have a couple of comments:

1. The paper assumes there are only two components: Risky stocks and some mythical bill that has no risk, retains its constant value and, in one example, provides a handsome yield.

2. Suppose I implement CPPI, the stock market drops 25% or some sufficient number that I sell all stocks. How do I know when to buy stocks back again?

My view of the usefulness of rebalancing is not really what is in the paper. It is to maintain a diversified portfolio of volatile assets: Large stocks, small stocks, REITs, metals, foreign stocks, corporate bonds ... whose market fluctuations and movements are not perfectly correlated.

Keith
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Re: Asymmetric Rebalancing: What and Why?

Post by FillorKill »

2. Suppose I implement CPPI, the stock market drops 25% or some sufficient number that I sell all stocks. How do I know when to buy stocks back again?
Keith,

I would direct all new funds, from whatever source, that exceed the floor, to equities. The goal is to maintain the integrity of the floor.

Also - recall the derision that 'plan B' encountered as it was viewed as selling into the bear? CPPI has a similar feature. That is one of the things I was alluding to. Using this strategy vs selling-out due to fear and plan abandonment are quite different.
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Re: Asymmetric Rebalancing: What and Why?

Post by sscritic »

magician wrote: (I think that there's a way to link to a specific post within a thread, but I don't recall how to do it; If I had, I'd have done so here, rather than linking to the entire thread.)
http://www.bogleheads.org/forum/viewtop ... 7#p1602167

Look for the small icon of a piece of paper, at least that's what I think it is, to the immediate left of by, as in "by grayfox » Sat Feb 02, 2013 9:11 am"

Right click on it, and choose copy link. Paste that link into your post. That link will have a url ending in p=xxxxx#p=xxxxx; that's how you know it points to a post (starting with the letter p) rather than to a thread (starting with the letter t).
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Re: Asymmetric Rebalancing: What and Why?

Post by umfundi »

BBL wrote:
2. Suppose I implement CPPI, the stock market drops 25% or some sufficient number that I sell all stocks. How do I know when to buy stocks back again?
Keith,

I would direct all new funds, from whatever source, that exceed the floor, to equities. The goal is to maintain the integrity of the floor.

Also - recall the derision that 'plan B' encountered as it was viewed as selling into the bear? CPPI has a similar feature. That is one of the things I was alluding to. Using this strategy vs selling-out due to fear and plan abandonment are quite different.
Yes, I remembered that as soon as I read the paper.

Maybe we should start a new thread.

What I don't understand is this: With CPPI you (the CPPI adherent, not "you") define a floor, which is less than you have. Let's say you have $10 and your floor is $8. But, you don't invest only $2, you invest $4. (Your multiplier is 2.) If the market drops 50%, you sell out because you now have lost $2, and are at your floor. You have $8. End of story, no matter what the market does subsequently.

Unless new money magically shows up. If you get a dollar, you would invest $2 in the market.

As a disciple of Michael Zwecher and Jim Otar, I don't see why you would leverage the floor to invest in the market. If I had $10 and a floor of $8, I would only invest $2. The market can go to zero, I still have the floor. But, if the market drops 50% and then recovers, I still have $10. The CCPI adherent has $8. Sure, my upside potential is only half that of CPPI, but what do I really care? The floor is what I need.

Of course, it's quite possible I completely misunderstand how this is supposed to work.

Keith
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Re: Asymmetric Rebalancing: What and Why?

Post by Rodc »

umfundi wrote:There is a missing component here: What are you rebalancing with? Is this like the arguments about Dollar-Cost Averaging, where the whole focus is on the "risk" of stocks, but the other part is some mythical safe liquid cash reserve that has no risk at all?

I ran some simulations some time ago. The scenario was a 50/50 portfolio of stocks and bonds (TSM and TBM) with a monthly investment for about a dozen years to the start of 2012.

Case 1: Monthly investment equally in stocks and bonds, no rebalancing.
Case 2: Monthly investment of the same amount, portfolio rebalanced to 50/50 each month.

The result was enough to convince me that monthly rebalancing is worth a bonus of about 0.3% per year in returns vs. not rebalancing.

Given that, it would seem that not rebalancing some of the time can only cut the rebalancing bonus. I cannot see that it makes any difference if you rebalance only on the upside, or only on the downside.

And, I tend to agree with comments by others, that elaborate rebalancing strategies are market timing (or, even worse, technical analysis) in disguise.

Keith
0.3% per year difference sounds like a statistical dead heat. Noise. Effectively no meaningful difference. Pick a different period get a different answer.

This all reminds me a post from a wise elder poster on a woodworking board I used to frequent regarding long somewhat heated threads on who made the best contractor grade tablesaws. "The only reason we have long heated arguments is because the difference one to another is too small to matter. If one really was better we would all know it and there would be no argument."

Rebalancing, especially the details of how one does it, is way down the list of what matters.

Pick any more or less rational method and move on to something that actually matters.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
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Re: Asymmetric Rebalancing: What and Why?

Post by Clive »

Midway rebalancing is a more neutral overall choice. With full rebalancing you're timing that the prior trend wont continue but will reverse (mean reversion). With no rebalancing you're betting that the prior trend will continue and wont mean revert. Midway rebalancing is more neutral (you'll be half right, half wrong no matter what).

i.e. if you have 60-40 target weightings and that's moved to 80-20 then full rebalancing involves selling down 20 out of the 80 part to add to the 20 part. Midway rebalancing would sell down only 10 to add to the 20 part (making the portfolio 70-30). Not rebalancing too often, perhaps once yearly at most, and if that remained unchanged then at the end of the next year you might sell down 5 more (making 65-35)...etc.

Some judgement should also be made as to whether rebalancing was appropriate or not under the current economic conditions. For instance if you held gold that was rising strongly whilst all other assets were in sharp decline, you might consider deferring any rebalancing until perhaps things had quietened down.

Image

The negative side to that is your portfolio risk can become much more heavily weighted into a single risk factor (asset).
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Re: Asymmetric Rebalancing: What and Why?

Post by FillorKill »

Interesting discussion, Keith
As a disciple of Michael Zwecher and Jim Otar, I don't see why you would leverage the floor to invest in the market.
Presumably to enjoy the added upside potential. 50% declines are not all that common but we have to expect them, no doubt.
Unless new money magically shows up.
As an accumulator this magic happens for me twice per month :happy which is part of the appeal [new funds to direct to equities under the scenario you describe], but I do see your point.

I'm an Otar fan as well I refer to UTRM frequently.
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Re: Asymmetric Rebalancing: What and Why?

Post by umfundi »

BBL wrote:Interesting discussion, Keith
Thanks. I like to figure out how things work. I am grateful to people like Zwecher, Otar and Pfau for expanding the discussion beyond rules of thumb and dogmatic slogans

By the way, I am retired, so I have a real floor and new money to invest does not show up periodically.

Unless you are on a glide path to retirement (say, within ten years) why would you have a floor at all?

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Re: Asymmetric Rebalancing: What and Why?

Post by jeffyscott »

umfundi wrote:If I had $10 and a floor of $8, I would only invest $2. The market can go to zero, I still have the floor. But, if the market drops 50% and then recovers, I still have $10. The CCPI adherent has $8. Sure, my upside potential is only half that of CPPI, but what do I really care? The floor is what I need.
I agree, once you have "enough", I'd rather keep the "enough" part relatively safe. I had a different strategy before having enough to ensure a reasonable retirement and the strategy varied as the enough threshold was approached.

While accumulating and a long way from retirement, we had a declining fixed allocation. Started at 75% stocks and declined to 50% as assets increased. As we were transitioning to having enough, 2008-09 happened and I realized planned early retirement was now 6-8 years away and I wanted to be quite sure to at least keep enough money to ensure the ability to do that, this did not mean selling stocks but just slowing down and limiting rebalancing.
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Re: Asymmetric Rebalancing: What and Why?

Post by Leesbro63 »

There was a discussion that I initiated a while back called "REBALANCING INTO POVERTY' or something like that. The reason for assymetrical rebalancing for those of us well into the accumulation phase...and more importantly the older you get/less time you have...is that doing a traditional rebalance is a Pascal's Wager. Odds are things will turn around but on the slim chance they don't, you're dead! If someone rebalanced at DOW 6666 and it went to 3333 (VERY possible at the time...no one knew what was gonna happen...banks failing, rock solid businesses going under etc) and, that person would have sold safe fixed income to buy risky equity and lost half of what was rebalanced. And at 3333 there's always the chance it goes to 1666 and you lose half again.

Traditional rebalancing for someone well into accumulation or already in retirement is Russian Roulette.
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Re: Asymmetric Rebalancing: What and Why?

Post by magician »

sscritic wrote:
magician wrote: (I think that there's a way to link to a specific post within a thread, but I don't recall how to do it; If I had, I'd have done so here, rather than linking to the entire thread.)
http://www.bogleheads.org/forum/viewtop ... 7#p1602167

Look for the small icon of a piece of paper, at least that's what I think it is, to the immediate left of by, as in "by grayfox » Sat Feb 02, 2013 9:11 am"

Right click on it, and choose copy link. Paste that link into your post. That link will have a url ending in p=xxxxx#p=xxxxx; that's how you know it points to a post (starting with the letter p) rather than to a thread (starting with the letter t).
Thanks!

Here's the post I'd intended to cite.
Last edited by magician on Sun Feb 03, 2013 12:01 pm, edited 2 times in total.
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Re: Asymmetric Rebalancing: What and Why?

Post by FillorKill »

Unless you are on a glide path to retirement (say, within ten years) why would you have a floor at all?
If you're on the younger side and have your number [or close] and you consider downside protection as increasingly important.

Also I would implement [if I ever actually did] with 3 numbers in mind.

Let's say:
I have 3M
I must have 1.5M to maintain the life I want without any equity [can use annuities, TIPS, IBONDS and other cash equivalents to see me through].
I set my floor at 2M because I want plenty of room for error.

My floor is not my minimum 'must have' I have a nice fudge factor there to account for eventualities.

It is a different concept when you use a number well above your 'must have' to set the floor.
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Re: Asymmetric Rebalancing: What and Why?

Post by letsgobobby »

jeffyscott wrote:
umfundi wrote:If I had $10 and a floor of $8, I would only invest $2. The market can go to zero, I still have the floor. But, if the market drops 50% and then recovers, I still have $10. The CCPI adherent has $8. Sure, my upside potential is only half that of CPPI, but what do I really care? The floor is what I need.
I agree, once you have "enough", I'd rather keep the "enough" part relatively safe. I had a different strategy before having enough to ensure a reasonable retirement and the strategy varied as the enough threshold was approached.

While accumulating and a long way from retirement, we had a declining fixed allocation. Started at 75% stocks and declined to 50% as assets increased. As we were transitioning to having enough, 2008-09 happened and I realized planned early retirement was now 6-8 years away and I wanted to be quite sure to at least keep enough money to ensure the ability to do that, this did not mean selling stocks but just slowing down and limiting rebalancing.
what do you put the $8 in, that is safe from inflation, credit risk, etc?

If one needs $50k to live on and has $10M, the answers are easy. This is the Zvi Bodie fantasy. Everything in TIPS, real yield be damned. Let's talk reality: let's talk someone who needs $50k but only has $1M. The only answer I see is a SPIA, then throw the rest at the markets. Is that what you think is best?

I think most of these discussions come out of decumulators taking on too much risk to begin with. They realize this halfway into a severe downturn and then decide to (in essence) change their asset allocation; they call it 'not rebalancing into oblivion' but really they just discovered their true risk tolerance and took risk off the table in a desperate act of preservation.

Nisi's proposal is a good one: no one should be allowed to be more than 60/40 until they've ridden through one good, hard bear market.
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Re: Asymmetric Rebalancing: What and Why?

Post by umfundi »

what do you put the $8 in, that is safe from inflation, credit risk, etc?
Check the original paper. It's that mythical investment that is always on the other side of a discussion about DCA or rebalancing as a market timing (rather than risk management) strategy. It is perfectly safe, liquid, never fluctuates in real value and yields income.

Keith :P
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Re: Asymmetric Rebalancing: What and Why?

Post by jeffyscott »

letsgobobby wrote:what do you put the $8 in, that is safe from inflation, credit risk, etc?
Well, I did say "relatively safe". That did include the TIPS fund, back in 2008, but sold the last of that some time ago. What I consider to be our safe assets are currently mostly in a stable value fund, with some in I-bonds and CDs. Note that I am only talking about being as certain as possible that we have enough to get us from early retirement to the point where we both can get SS, this is about a 10 year period.

For us, after that first ~10 years, we will likely be fine even with very poor returns. We would not have the income we'd probably like to have, but we won't suffer much on just our income from SS and a pension. Also the pension has a unique structure in that increases will likely exceed inflation, if the stock market does well, but if stock returns are poor it will remain a fixed dollar amount. So we kind of have the upside of the stock market already partially built into that pension.
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Re: Asymmetric Rebalancing: What and Why?

Post by Leesbro63 »

jsl11 wrote:Well, I can remember 1974. I did not think it was scary. I was just unhappy that my holdings went down and did not rebound for quite some time. There certainly was no talk of the investment industry giants going out of business. We were not on the verge of a financial collapse. That bear market was well within the range of normalicy.
It might have been scary if you were 40 years older and in or close to retirement with a big stash. And you dismiss the talk of running out of oil as being of lesser "scariness" than banks crashing. It was just as scary. And the decline was in the neighborhood of 50% just as 2008-9. And we did not know that it wouldn't be as bad as 1929 until after the fact.
While I can't remember 1929, that was even worse than 2008. At that time, most people could not invest because:
1. Most people could not afford to invest.
2. There were no inexpensive ways to invest.
3. Most of those who invested were doing it on margin; it was the thing to do. Those investors lost everything.
4. If you wanted to invest, your money was lost or tied up when your bank failed.
5. There was 25% unemployment. Most people were worried about keeping/finding employment and putting food on the table.
There was no social security, no FDIC. People were selling pencils on street corners and standing in soup lines just to survive.
Rebalancing was so far beyond their concerns, that the mere mention of it would have been laughable.

Jeff
I agree that 2008 wasn't as bad as 1929, but like 1973-4, we only know that in hindsight as well. And there are some sources who think the whole social safety net that you point out as saving 2008 from becoming 1929 is a house of cards that will eventually come home to roost. Some even believe that the real unemployment number, when factoring in underemployment, isn't too far away from the 1930s scenario. We could still merely be in the middle of a bear market rally within the next Great Depression. I hope not and am not predicting so and don't invest as if...but just pointing out that your comments seem to reek of a smug comfort that some market declines are "normal" and not scary and others are not normal and therefore are scary. We don't know what's normal until after the fact so all declines have the same POTENTIAL to be scary.
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Re: Asymmetric Rebalancing: What and Why?

Post by sport »

Leesbro63 wrote: I agree that 2008 wasn't as bad as 1929, but like 1973-4, we only know that in hindsight as well.
That was my point. It could have just been the beginning of something much worse, and there was no way to tell. If it had turned out to be much worse, rebalancing would have been disasterous. Therefore, even if one's IPS called for rebalancing, more caution was warranted.
Leesbro63 wrote:...but just pointing out that your comments seem to reek of a smug comfort that some market declines are "normal" and not scary and others are not normal and therefore are scary. We don't know what's normal until after the fact so all declines have the same POTENTIAL to be scary.
I would suggest that the "smugness" lies with those who think it is a good idea to rebalance at such perilous times, just because their IPS says it's time to rebalance. My suggestion represents the opposite of smug comfort. My suggestion represents fear of something much worse to come and recommending caution rather than rashness in such situations.

I have lived through a number of bear markets. Bear markets come and go. Generally they are buying opportunities. However, what was happening in 2008 was unprecedented. The POTENTIAL outcome was much more serious than anything I had ever seen before. Accordingly, I suggest that blindly rebalancing at that time would have been foolish, except for younger investors.
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Re: Asymmetric Rebalancing: What and Why?

Post by Call_Me_Op »

I agree with jsl11's comments above. It is easy to look back at a major market dislocation like we had in 2008 and conclude that the obvious course of action was to add more to equities in March of 2009. But when you are living through it, you don't know when the carnage is going to stop - and there is really nothing that says that it must stop - not before most of the value of stocks has vaporized. I think investors have come to expect that all downturns will be followed by rapid recoveries. But stocks do not really have an intrinsic bottom. This is why someone as wise as Larry Swedroe said above that he would be fine if stocks went to zero. He was not saying that he thinks this would ever happen, but he is acknowledging that as a theoretical possibility.
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Re: Asymmetric Rebalancing: What and Why?

Post by sport »

Call_Me_Op wrote:I agree with Leesbro's comments above. It is easy to look back at a major market dislocation like we had in 2008 and conclude that the obvious course of action was to add more to equities in March of 2009. But when you are living through it, you don't know when the carnage is going to stop - and there is really nothing that says that it must stop - not before most of the value of stocks has vaporized. I think investors have come to expect that all downturns will be followed by rapid recoveries. But stocks do not really have an intrinsic bottom. This is why someone as wise as Larry Swedroe said above that he would be fine if stocks went to zero. He was not saying that he thinks this would ever happen, but he is acknowledging that as a theoretical possibility.
I may be mistaken, but I believe you are agreeing with me, rather than Leesbro.
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Re: Asymmetric Rebalancing: What and Why?

Post by Call_Me_Op »

jsl11, yes - I was agreeing with you - I have updated my post. Thanks.
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Re: Asymmetric Rebalancing: What and Why?

Post by jeffyscott »

Call_Me_Op wrote:It is easy to look back at a major market dislocation like we had in 2008 and conclude that the obvious course of action was to add more to equities in March of 2009. But when you are living through it, you don't know when the carnage is going to stop - and there is really nothing that says that it must stop - not before most of the value of stocks has vaporized.
Yes, that is what I learned at that time..."oh, there's a reason why major declines like that occur". In 2008, like 1929, there was a possibility that it was the end of the economy as we had known it, that was not the case in 2000, I'm not sure about 1973-74.
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Re: Asymmetric Rebalancing: What and Why?

Post by Call_Me_Op »

jeffyscott wrote:
Call_Me_Op wrote:It is easy to look back at a major market dislocation like we had in 2008 and conclude that the obvious course of action was to add more to equities in March of 2009. But when you are living through it, you don't know when the carnage is going to stop - and there is really nothing that says that it must stop - not before most of the value of stocks has vaporized.
Yes, that is what I learned at that time..."oh, there's a reason why major declines like that occur". In 2008, like 1929, there was a possibility that it was the end of the economy as we had known it, that was not the case in 2000, I'm not sure about 1973-74.
Indeed - 2008 was much more serious than most investors realize. The economy was frozen - and were it not for the actions of the Government (things like backstopping the money market) it's hard to say how bad things could have gotten. This confidence that many people seem to have that it's some sort of a game - that the stock market will necessarily recover - really has no basis beyond the unsubstantiated assumption that patterns of the recent past must necessarily repeat themselves.

I like the idea of setting a floor for your SAFE investments. You can rebalance all you want - but you must not allow the SAFE category to fall below that floor. That might mean that you rebalance symmetrically unless you hit the floor - at which point you transition to the asymmetric rebalancing approach discussed above. The willow tree that refuses to bend in the wind will break.
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Re: Asymmetric Rebalancing: What and Why?

Post by dbr »

larryswedroe wrote: Third, I choose asymmetric rebalancing for simple reason that I have no need to take risk and want to sleep well so I can enjoy life and not worry about especially since my ownership interest in my firm has large equity exposure. I would not suggest that it is the right strategy for others. But it helps me since I have zero need for risk but still choose to take some as there are periods when stocks do well and bonds poorly. But the level is such that if the stocks went to zero it would not change my lifestyle at all.

I do rebalance on the upside though for stocks.

I hope that is helpful
Larry
In accord with this point of view my policy is to not rebalance into stocks, but only out of stocks. I am not concerned about "missing" an opportunity.

I think the doctrinaire arguments that hold rebalancing as an absolute are too narrowly conceived. It is clear that individual situations allow various answers to this question. I also believe as some have posted that the benefit on average is exaggerated.
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The Costs of Not Rebalancing

Post by EDN »

I've skimmed some of the comments since I checked out and am quite surprised at the number of posts from people who don't (or think its OK to not) rebalance their portfolios when stocks are down (significantly). I never would have guessed so many struggle with this. A few comments:

1. A globally diversified equity portfolio (40 different countries, 8,000+ companies) is not going to zero. And if it does, nothing else will really matter.

2. The long-term trajectory of our global economy and modern markets is up. Sure, some countries will experience long set-backs (Japan since 1989) but this need not and probably won't affect the entire global market (see non-Japan, US, and EM stocks in the last 2 decades), may not even impact all stocks in that market (Jap Value and Small stocks have done OK), and often these come after long periods of exponential growth (MSCI Japan Index averaged almost 25% per year from 1970-1988). And if it does, see #1.

3. Much of the risk of a global equity portfolio is not "going to zero", but that it can lose 60%+ of its value in a span of a few short years markets fully price in a (reasonable) worst-case scenario no matter how remote the probability. The "it just happened to" aspect of these periods isn't the miraculous/improbable recovery, but improbable fact that the market saw the need to fall as far in the first place (was the value of the global economy really 70% less than it was just a few years prior?). The recoveries (that have always happened) weren't any sort of divine intervention, it was the declines that were probably unnecessary/unlikely were it not for markets pricing it such remote scenarios. The recoveries were the rational/expected part of the pattern that were necessary to erase the unlikely part of the equation.

4. For many investors, a much more serious long-term risk is a dramatic decline in the purchasing power of their retirement assets, an issue that is only magnified if you do not hold enough in assets that at least have the chance (and high probability) of achieving positive real returns during your lifetime -- especially when those assets are priced to achieve their highest returns (after large declines when you should be rebalancing).

5. Setting a floor and not rebalancing when stocks are down is fine if you understand the costs and the probability that it won't work out the way you expect and that better alternatives exist.

Lets look at the two worst bear markets on record, '29-'32 and '08. We will model a $1M portfolio pulling 40K per year adjusted for inflation from 2 portfolios -- a "traditional" 60/40 that it annually rebalanced and one that is never rebalanced and the withdrawal is pulled only from bonds ("floor" 60/40). 60/40 in each case is 12% S&P 500, 18% large value, 30% mid/small value, and 40% 5YR T-Notes.

--4 years after the Great Depression, net of withdrawals, the "traditional" 60/40 had a 0.7% higher annual return, and a bond value (viewed as the "safety cushion") of $380K vs. just $260 for the "floor" 60/40.

--4 years after 2008, net of withdrawals, the "traditional" 60/40 had a 0.9% higher annual return, and a bond value (viewed as the "safety cushion") of $417K vs. just $293 for the "floor" 60/40.

So you haven't actually accomplished what you'd hoped -- you had less overall portfolio wealth (increasing the probability of portfolio shortfall) and less money in safe assets that could get you through the next bear market. In each case, if it was the temporary (albeit significant) equity declines that kept you up at night, holding less in stocks to begin with (50/50 instead of 60/40) and rebalancing back to that mix would have led to (a) less total losses during the decline than a higher equity % not rebalanced, and (b) even more in safe fixed income in the years after the recovery.

In summary, you can choose to avoid rebalancing based on the fear of stocks going to 0, but they aren't and it won't matter if they do. You can avoid rebalancing because you think you are compromising your retirement safety or throwing good money after bad by doing so, but actually by not doing what you should, you are just costing yourself wealth and putting your retirement in greater peril.

Eric
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Re: Asymmetric Rebalancing: What and Why?

Post by Call_Me_Op »

For some people, the goal is not to have the greatest expected return - but to make sure they have enough - with anything above that being "gravy." If the direction of stocks is up, as you predict, this approach should allow you to live comfortably with a lot of extra money you won't even spend.
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Not Rebalancing = Risk of Not Enough

Post by EDN »

Call_Me_Op wrote:For some people, the goal is not to have the greatest expected return - but to make sure they have enough - with anything above that being "gravy." If the direction of stocks is up, as you predict, this approach should allow you to live comfortably with a lot of extra money you won't even spend.
But as my examples showed, you run a greater risk of not having enough by not rebalancing (less in bonds in both extreme examples). Further, "enough" is never known in advance in a world of a rising living standards and unknown longevity risk--what you think is enough today may not turn out to be the case if your assets don't earn acceptable returns (which could be the case if you don't fully benefit in market returns up to the AA% you are holding in stocks) and they need to last longer than expected.

I worry that we are using this "I just want to have enough" as a reason to convince us its OK to do what we know we shouldn't when things begin to get scary. If I thought I may fall prey to this behavior, like I said previously, I'd just hold less in stocks (assuming I could still reach my goals with less in equities) but still rebalance -- that would also be a better way to go than a higher equity allocation but not buying when stocks had fallen.

I'm not trying to be argumentative, just trying to present all sides to the situation.

Eric
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Re: Not Rebalancing = Risk of Not Enough

Post by Call_Me_Op »

EDN wrote:
Call_Me_Op wrote:For some people, the goal is not to have the greatest expected return - but to make sure they have enough - with anything above that being "gravy." If the direction of stocks is up, as you predict, this approach should allow you to live comfortably with a lot of extra money you won't even spend.
But as my examples showed, you run a greater risk of not having enough by not rebalancing (less in bonds in both extreme examples).
But those are not the extreme examples that we worry about. We worry about a Japan-style decline where stocks do not recover for decades. Not trying to be argumentative either - but I think the asymmetric rebalancing is really to guard against remote possibilities - but possibilities nonetheless.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein
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Re: Asymmetric Rebalancing: What and Why?

Post by Rodc »

Eric,

To start, I have always rebalanced in down markets. But I have no issue with someone who has enough and chooses not to.

If someone has enough in safe assets to live a nice comfortable life (yes nothing is known with perfect precision, the supposed rebalancing bonus included), an extra potential (remember, history may not repeat) fraction of a percent return may have little to no value to them. This is a well known fact of utility curves. The old $1 to a poor person is far more meaningful than $1 to a rich person. They may well agree they are likely to leave that fraction of one percent return on the table, but they rationally have no interest in putting safe assets at risk for the potential to earn that fraction of a percent. This is little different from saying I have enough I am going to move from 60/40 to 20/80; you largely opt out of playing the game. You won.

This may not be for everyone, but it is a rational approach.
as a reason to convince us its OK to do what we know we shouldn't when things begin to get scary.
Vs using history that may not repeat to take on more risk than is necessary. It works both ways.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
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Putting Japan in Perspective

Post by EDN »

Call_Me_Op wrote:
EDN wrote:
Call_Me_Op wrote:For some people, the goal is not to have the greatest expected return - but to make sure they have enough - with anything above that being "gravy." If the direction of stocks is up, as you predict, this approach should allow you to live comfortably with a lot of extra money you won't even spend.
But as my examples showed, you run a greater risk of not having enough by not rebalancing (less in bonds in both extreme examples).
But those are not the extreme examples that we worry about. We worry about a Japan-style decline where stocks do not recover for decades. Not trying to be argumentative either - but I think the asymmetric rebalancing is really to guard against remote possibilities - but possibilities nonetheless.
I know, and I addressed the Japan situation above: a country specific example with little bearing on global portfolios and extremely time dependent. Also relevant to a market that is trend-less: it is unlikely a 0% returning asset has a 0% return every year -- so rebalancing up and down has an even greater impact on portfolio results. The "diversification return" of an annually rebalanced 60/40 Japan balanced portfolio was 1.1% per year from 1989-2012 (calculated as the difference of the return on the portfolio minus the return on the weighted average of the asset class returns)!

But lets assume the Japanese example does apply -- are you better off investing in a balanced portfolio (20% MSCI Japan, 20% Japan Value, 20% Japan Small, 40% 1-30YR Japan Gov't Bonds) and rebalancing annually, or are you better off not rebalancing between stocks and bonds, instead just drawing your $ from bonds every year and only rebalancing out of stocks and into bonds once they've gone above the 65% threshold (5/25 rebalancing rule), but never after they've fallen to 55% or less--we'll call it the "floor" approach?

Same assumptions: $1M, 40k annual withdrawals (no inflation adjustment -- Japan has seen deflation so we'll call it a wash).

From 1989-2012, you'd have earned about 0.5% higher returns net of withdrawals by simply rebalancing annually. In 14 out of the 24 years, you'd actually hold more in bonds under the annually rebalanced approach than the "floor" approach--so you'd feel more secure, and by YE 2012 the additional amount in bonds in the annually rebalanced portfolio was about $100K, or about 2.5 years more of current withdrawals in bonds.

I get that not having to buy more stocks when they are down "feels better", but there is a cost to feeling better and it is lower returns and less safety as you deplete your safety cushion more quickly and the safety cushion grows smaller over time. So we shouldn't refer to asymmetric rebalancing as anything associated with "being better under a Japan-style market", "less risky", or "more likely that I'l be successful if stocks go to 0". All of those take on some form of inaccuracy to irrelevance. Its best just to say "I'm not going to rebalance when stocks are down and I'm willing to accept lower risk-adjusted returns with no financial benefit except the comfort I take in knowing I don't have to buy stocks and see them lose value temporarily". So AR is just an emotional insurance policy--an expected loss whose benefit is purely emotional.

Eric
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Rebalancing is Rational

Post by EDN »

Rodc wrote:Eric,

To start, I have always rebalanced in down markets. But I have no issue with someone who has enough and chooses not to.

If someone has enough in safe assets to live a nice comfortable life (yes nothing is known with perfect precision, the supposed rebalancing bonus included), an extra potential (remember, history may not repeat) fraction of a percent return may have little to no value to them. This is a well known fact of utility curves. The old $1 to a poor person is far more meaningful than $1 to a rich person. They may well agree they are likely to leave that fraction of one percent return on the table, but they rationally have no interest in putting safe assets at risk for the potential to earn that fraction of a percent. This is little different from saying I have enough I am going to move from 60/40 to 20/80; you largely opt out of playing the game. You won.

This may not be for everyone, but it is a rational approach.
as a reason to convince us its OK to do what we know we shouldn't when things begin to get scary.
Vs using history that may not repeat to take on more risk than is necessary. It works both ways.
Rod,

I think you are mixing rationality with behavioral preferences, which may or may not be rational. Rational is to hold a portfolio with an appropriate expected return for your goals without taking unnecessary risk. That risk is either concentration, active management, or an asymmetric portfolio that holds more stocks prior to declines and less stocks prior to recoveries. Irrational is to adopt a portfolio with a higher equity component that you don't rebalance when equities are down (reducing returns for a given level of risk) vs. a lower equity commitment (same return as previous portfolio) with less downside that you do rebalance. In doing so, you are trying to get something for nothing--higher returns from stocks while hoping they don't decline significantly. I'd also argue that "irrational" includes making portfolio decisions under the belief that if stocks go to 0% you'll still be OK in both terms (that stocks may go to 0% and you'd still be OK), but that is another topic.

It is a preference to not buy stocks after they have declined (and expected returns are higher) thereby lowering the risk-adjusted return of your portfolio. But there is a cost to that and bearing that cost isn't rational relative to achieving a similar return by simply holding a lower-risk portfolio and rebalancing.

By the way, we are talking about long-term portfolios (even if its a 75 year old with only 1/2 their 3 decade retirement left), not the 4 year scenario you mentioned a few days ago -- if you need 100% of your money in 4 years this discussion doesn't apply. (just to clarify that point).

Eric

PS -- to say this more simply: if two portfolios have the same expected return, one has less downside risk but requires you to rebalance when stocks are down, while the other has greater downside risk but lets you off the hook when stocks drop, it is irrational to choose the later over the former (and that is the case for a lower equity/rebalanced portfolio vs. a higher equity/asymmetric rebalanced portfolio). That is a preference. I'm fine with anyone doing that, just don't assume there are not actual costs that must be compared to purely emotional benefits.

I'm quite sure no one is interested in anything further I have to say on the topic, I'll let you all takeover from here :happy . Thanks for the thoughts.
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Re: Asymmetric Rebalancing: What and Why?

Post by Call_Me_Op »

Eric,

The AA you selected for Japan is somewhat contrived. Be that as it may, there are certainly scenarios that are theoretically possible where symmetric rebalancing can lead to your eating dog food in retirement. Even if we have never experienced such a scenario, the fact that such a scenario is possible is what would lead some very conservative investors to put a floor on their safe assets.
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Re: Asymmetric Rebalancing: What and Why?

Post by umfundi »

I'm quite sure no one is interested in anything further I have to say on the topic,
I can assure you that statement is 100% wrong!

Eric,

I, for one, greatly appreciate your insights and perspective.

Keith
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Re: Asymmetric Rebalancing: What and Why?

Post by Rodc »

I think you are mixing rationality with behavioral preferences, which may or may not be rational. Rational is to hold a portfolio with an appropriate expected return for your goals without taking unnecessary risk.
I think I mean rational or at least not merely behavioral preferences. The problem is, I think, that you are treating this as a well posed problem such as one might find with a dice tossing game. Here we do not have well defined probabilities. We have at best a relatively small set of samples from which to estimate statistics (100 annual samples of returns with a stdev of 20% implies we do not know the actual mean return to better than 2% (stdev of the error in the estimate of the mean, assuming very favorable assumptions about the distribution) so telling me the rebalance bonus is some number like 0.something % does not give me warm fuzzies), and even that is more than we have (the statistical process is unlikely to be stationary for example) If we really had well defined probabilities we could accurately assess expected returns as well as risk and be fully rational.

In the end an optimization problem has a solution that is only as good as the fit of reality to the model assumptions, unclear to me that the fit here is very good.

But if you wish, I will not use a technical term. I'll just say it is sensible. May or may not be optimal, but is good enough (which in the end I think is the best we can do due to the considerations I mention above).

This is more challenging. So, I don't buy there is one right answer. That assumes a simple model world that is overly simplified. Seems to me.
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
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Re: Asymmetric Rebalancing: What and Why?

Post by Rodc »

I was thinking about this a little more.

One key component of the financial collapse a few years ago was poor risk modeling and under appreciation of risk by big banks and other large players in the market.

Seems to me this component is also at play in extreme positions that the only "rational" choice is to rebalance from bonds into stocks when stocks drop. This seems to stem from an implied assumption that in the long run stocks are not really risky; sure stocks may suffer a considerable decline, but will with extremely high likelihood bounce back before you need to withdraw any significant amount from your stock allocation.

The difference in attitude, always rebalance both sides vs only rebalance when stocks gain really comes down to how one models risk, and how much risk one is willing to bear. Unfortunately we have only a very modest ability to model risk, so this will remain an open question.

I have not come to any firm personal conclusions on which is best. For now I am sticking to my rebalancing plan, a standard band based approach, with a reevaluation of our financial situation and asset allocation every few years, tending toward more conservative as we have less need/desire for returns vs need/desire to protect what we have. But I'll keep open the option that I can change my mind. :)
We live a world with knowledge of the future markets has less than one significant figure. And people will still and always demand answers to three significant digits.
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Re: Asymmetric Rebalancing: What and Why?

Post by richard »

larryswedroe wrote:There is no reason to allow market to determine the amount of risk you are taking. Swensen of Yale follows this approach, using cash flows to rebalance
How can you not allow the market to determine the amount of risk you are taking? You can determine what your allocation is, but you can't determine the risk of any asset or set of assets, only the market does that. Risk depends on market, economic, political, etc. factors, not your personal choice.

Risk is not constant and a constant allocation is not a constant amount of risk. A constant allocation may be a reasonable approximation of a constant level of risk, given the issues with measuring risk, but it is not the same thing.
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Re: Asymmetric Rebalancing: What and Why?

Post by richard »

Rodc wrote:Seems to me this component is also at play in extreme positions that the only "rational" choice is to rebalance from bonds into stocks when stocks drop. This seems to stem from an implied assumption that in the long run stocks are not really risky; sure stocks may suffer a considerable decline, but will with extremely high likelihood bounce back before you need to withdraw any significant amount from your stock allocation.

The difference in attitude, always rebalance both sides vs only rebalance when stocks gain really comes down to how one models risk, and how much risk one is willing to bear. Unfortunately we have only a very modest ability to model risk, so this will remain an open question.
Agreed. The implicit assumption is that if you hold long enough stocks are not risky and the only risks are psychological, such as panic selling or failing to rebalance out of fear.

However, stocks really are risky and there can be no assurance that they will ever rebound from a decline or achieve some desired level of growth, no matter how long we hold, how steadfast our determination or how pure our hearts. The main risk is economic, not behavioral. If stocks were not genuinely risky, there would be no reason for them to have a higher return than bonds or other investments.
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Re: Asymmetric Rebalancing: What and Why?

Post by larryswedroe »

Richard, What I meant was that you should not allow the market to determine how much assets (and %) you have allocated to risky assets. And IMO there is no logic whatsover, Sharpe not withdstanding, for allowing the market to determine that. If you are at 60/40 for good reasons what possible logic is there for you to allow the market to put you at 80/20? If that was correct why were you not there in first place?
There is no logical answer.
Larry
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Re: Rebalancing is Rational

Post by richard »

EDN wrote:I think you are mixing rationality with behavioral preferences, which may or may not be rational. Rational is to hold a portfolio with an appropriate expected return for your goals without taking unnecessary risk.
Expected return means the probability weighted value of the investment, e.g., in one year it has a 1% chance of being worth $100,000 and a 99% chance of being worth $0, so it has an expected value of $1,000. If we pay $990 today, it has an expected return of ~1%.

One problem is that people think expected return means most likely, which is far from the case in my admittedly contrived example

The more fundamental problem is that we just don't know the odds. We have no good way of calculating future values or the chances of achieving those values.

All we can really say is that we expect stocks to return more than bonds, because they are riskier and therefore should have a risk premium, but that inherent in the concept of risk is the very real chance stocks will do worse, possibly much worse. We can't really quantify in any reliable manner.

So, while it would be rational to hold a portfolio with an appropriate expected return without unnecessary risk, we can't know what such a portfolio would be, we can only guess.
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Re: Asymmetric Rebalancing: What and Why?

Post by richard »

larryswedroe wrote:Richard, What I meant was that you should not allow the market to determine how much assets (and %) you have allocated to risky assets. And IMO there is no logic whatsover, Sharpe not withdstanding, for allowing the market to determine that. If you are at 60/40 for good reasons what possible logic is there for you to allow the market to put you at 80/20? If that was correct why were you not there in first place?
There is no logical answer.
Larry
Larry, my main point was that the market determines our level of risk. We may decide that a constant allocation is a rational way to manage risk, because we don't have any better method, but we shouldn't pretend risk is constant. Do you disagree?

The market ratio of stocks to bonds is almost always somewhere between 60/40 and 40/60. I doubt we have good enough tools to determine if one or the other would be better for us, given uncertainties about future returns, risk levels, etc. One is likely as correct as the other. Our crystal balls are cloudy.

As you know from our prior conversations on this point, I'm with Sharpe on this.

best wishes,
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Re: Asymmetric Rebalancing: What and Why?

Post by dbr »

The essence of this debate, or analysis, is which is the more astute method for a retiree in disaccumulation to manage risk:

1) Hold a smaller allocation to stocks and follow a conventional rebalancing plan (symmetric).

or

2) Risk a larger allocation to stocks but believe downside risk is somewhat curtailed by following a plan to not rebalance into stocks (asymmetric).

3) For completeness, we might add the option of risking a larger allocation and not rebalancing at all, if this does not distract from the conversation.

A consideration that applies is where does the AA go under different circumstances, but another consideration that applies is how does the investor view risk when the portfolio has become significantly larger or smaller than it was before, due to stock market gains and losses?

My intuitive guess is that 1) and 2) are equally acceptable approaches, although the "purist" will certainly consider 1) to have the force of Boglehead conventional logic.
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Re: Asymmetric Rebalancing: What and Why?

Post by bertilak »

larryswedroe wrote:Richard, What I meant was that you should not allow the market to determine how much assets (and %) you have allocated to risky assets. And IMO there is no logic whatsover, Sharpe not withdstanding, for allowing the market to determine that. If you are at 60/40 for good reasons what possible logic is there for you to allow the market to put you at 80/20? If that was correct why were you not there in first place?
There is no logical answer.
Larry
William F. Sharpe published a paper (2009) and a similar article in the May/Jun 2010 Financial Analysis Journal that I think attempt to provide a "logical answer."

Can I assume you are familiar with these publications and simply disagree with them? ("Sharpe not withdstanding") In my layman's point of view the argument seems quite convincing.

The 2009 paper has the following abstract (my underline):
Many institutional and individual investors have an asset allocation policy that calls for
investing a specified percentage of the total value of a portfolio in each of several asset
classes. To conform with such a policy as market values change requires selling assets
that performed relatively well and buying those that performed relatively poorly. Such a
strategy is clearly contrarian and can only be followed by a minority of investors. In
practice, many investors seldom rebalance completely to conform with their policy. On
the other hand, many multi-asset mutual funds, increasingly used in defined contribution
plans, do so frequently, resulting in contrarian behavior. This paper presents an
alternative approach, in which an asset allocation policy adapts as markets move, taking
into account changes in the outstanding market values of major asset classes.
Such
policies can take important information into account, reduce or avoid contrarian behavior
and could be followed by a majority of investors.
One paragraph in the Conclusion section of the 2010 article caught my eye (again, my underline):
I cannot easily understand why funds do not
routinely compare their asset allocations with current
market proportions in order to ensure that any
differences are commensurate with differences
between their circumstances and those of “the
average investor.”
Yet this comparison is rarely
done. Perhaps the lack of easily obtained data on
market values is the cause, with the absence of
such comparisons the effect. Alternatively, the situation
may be the reverse, with the lack of available
data on market values caused by insufficient
investor interest.
ref the underlined: We are quite happy to let the market determine prices, so why not also accept the market's determination of risk?
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Re: Asymmetric Rebalancing: What and Why?

Post by FillorKill »

Hey bertilak,

You could have just dropped this quote from the '09 paper and left it at that:

“Ultimately, the issue concerns the preferences of the various parties that will
bear the risk and/or enjoy the reward from investment. There is no reason to
believe that any particular type of dynamic strategy is best for everyone”.

But I suppose that would stifle the conversation a bit.... :happy
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Re: Asymmetric Rebalancing: What and Why?

Post by magneto »

Clive wrote:Midway rebalancing is a more neutral overall choice. With full rebalancing you're timing that the prior trend wont continue but will reverse (mean reversion). With no rebalancing you're betting that the prior trend will continue and wont mean revert. Midway rebalancing is more neutral (you'll be half right, half wrong no matter what).

i.e. if you have 60-40 target weightings and that's moved to 80-20 then full rebalancing involves selling down 20 out of the 80 part to add to the 20 part. Midway rebalancing would sell down only 10 to add to the 20 part (making the portfolio 70-30). Not rebalancing too often, perhaps once yearly at most, and if that remained unchanged then at the end of the next year you might sell down 5 more (making 65-35)...etc.

Breath of fresh air introducing time into consideration. Always moving in the right direction without pouring money into the bucket with a hole in the bottom too quickly.

However prefer smaller increments say 10-20% of the deviation each quarter.
'There is a tide in the affairs of men ...', Brutus (Market Timer)
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Re: Asymmetric Rebalancing: What and Why?

Post by sport »

The one other consideration that has not been resolved is whether asymmetric rebalancing, for those who choose it, should be for all market declines, or for selected declines, depending on the seriousness of the situation, as decided by the investor. For example, one could say that they will rebalance for "ordinary market corrections/declines", but not rebalance under potentially catastrophic situations, such as 2008. Does it make sense to try to characterize the possible magitude of a market decline?

Jeff
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Re: Asymmetric Rebalancing: What and Why?

Post by Leesbro63 »

jsl11 wrote:The one other consideration that has not been resolved is whether asymmetric rebalancing, for those who choose it, should be for all market declines, or for selected declines, depending on the seriousness of the situation, as decided by the investor. For example, one could say that they will rebalance for "ordinary market corrections/declines", but not rebalance under potentially catastrophic situations, such as 2008. Does it make sense to try to characterize the possible magitude of a market decline?

Jeff
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Re: Asymmetric Rebalancing: What and Why?

Post by sport »

Leesbro63 wrote:
jsl11 wrote:The one other consideration that has not been resolved is whether asymmetric rebalancing, for those who choose it, should be for all market declines, or for selected declines, depending on the seriousness of the situation, as decided by the investor. For example, one could say that they will rebalance for "ordinary market corrections/declines", but not rebalance under potentially catastrophic situations, such as 2008. Does it make sense to try to characterize the possible magitude of a market decline?

Jeff
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Re: Asymmetric Rebalancing: What and Why?

Post by jeffyscott »

jsl11 wrote:The one other consideration that has not been resolved is whether asymmetric rebalancing, for those who choose it, should be for all market declines, or for selected declines, depending on the seriousness of the situation, as decided by the investor.
Or you could rebalance only to the point where your "safe" assets are enough to carry you through the next X years, so that you reduce the chances of having to sell stocks at depressed prices. Which then leads to....
magneto wrote:Breath of fresh air introducing time into consideration. Always moving in the right direction without pouring money into the bucket with a hole in the bottom too quickly.

However prefer smaller increments say 10-20% of the deviation each quarter.
In 2008-09, I basically combined both of these things. I slowed down the rate at which I was adding money to stocks and there was a limit to how far I would go. I was not going to risk putting money needed in about the next 10 years into stocks, when there was always a chance that stock prices could stay low for an extended period of time. Slowing down could help to avoid reaching such a limit too soon and not having anything left to add to stocks at the lowest prices.
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Re: Asymmetric Rebalancing: What and Why?

Post by LadyGeek »

I just removed a few rude comments. As a reminder:
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