What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

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livesoft
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What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by livesoft » Wed Sep 13, 2017 4:18 pm

madsinger reported that he rebalanced yesterday: viewtopic.php?p=3530662#p3530662

That led to an interchange where neither one of us likes to move more than about a percent or two of our portfolios at once in a rebalancing move. That is, large moves are not for us.

I can guess that most people do not move even 5% at a time even though those 5/25 bands are discussed now and then.

So what's the largest percentage of your total portfolio value that you have exchanged in a rebalancing move? 1%? 5% 10%? Never rebalanced?
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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by MotoTrojan » Wed Sep 13, 2017 4:23 pm

What worries you about a larger exchange?

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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by Ice-9 » Wed Sep 13, 2017 4:25 pm

>10% in February or March 2009. I had been 84% equity / 16% fixed income. Man that hurt to do.

Edit to add: I am one of those 5/25 people by rule, but that only happens rarely. I check my asset allocation spreadsheet every paycheck and when needed update the allocation of my biweekly contributions so new money's only going to things that are below target for a sort of mini-rebalance.
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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by daveydoo » Wed Sep 13, 2017 4:27 pm

I did 12.5% in a single transaction about a year or two ago, purely for the purpose of re-balancing -- things had gotten more lop-sided than I realized. It was the "right" thing to do, BH-wise. Cost me a fortune in lost appreciation ever since, but I keep telling myself that it was the right thing to do :D . Have done a couple of 2.5% since then. Each one has cost/lost me money. But each one was the right thing to do. Gotta keep tellin' myself that...

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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by livesoft » Wed Sep 13, 2017 4:29 pm

MotoTrojan wrote:
Wed Sep 13, 2017 4:23 pm
What worries you about a larger exchange?
Say I move 10% from equities to bonds and equities go up another 10%. That means I have not gained another 1% in portfolio value which is a big deal when it comes to annual performance.

But if I move 1% and equities go up another 10%, then I have not gained 0.1% in portfolio value which is basically in the daily noise.

For me, it is not fear of losing money, but fear of missing out on gains ("lost appreciation" as daveydoo posted).

That's one reason why I can move 5% of portfolio value on a RBD.

I think another odd thing is that if one does 10 mini-rebalances instead of one big rebalance, then (by definition because of the frequency) one has a better chance to rebalance at the most opportune time. For instance, if I rebalance every single day in 2017, then I can state as a fact that I rebalanced on the best day possible in 2017.
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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by The Wizard » Wed Sep 13, 2017 4:33 pm

livesoft wrote:
Wed Sep 13, 2017 4:18 pm

...That led to an interchange where neither one of us likes to move more than about a percent or two of our portfolios at once in a rebalancing move. That is, large moves are not for us...
Myself also. 1% of portfolio is the most I've ever moved, and from stocks to TIAA Traditional, typically.
I have roughly 5% bands for my stocks allocation, so moving 1% gets me back within bands but not all the way to nominal.

This makes rebalancing a more frequent thing that doesn't feel weird...
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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by nisiprius » Wed Sep 13, 2017 4:38 pm

I'm sorry to say that I haven't kept good records. Since I don't do "slice-and-dice," have a simple portfolio, and don't believe in a rebalancing bonus, I'm sorry to say that I do it in a sloppy, casual way. When something prompts me to check, I check, and if it seems far away from the target percentages of U.S. stocks, international stocks, and bonds, and I feel an itch to "do something," I'll bring them back to my intended round-number percentages.

Usually that means something like 2%.

When I got cold feet on Vanguard REIT Index holding when it plunged in 2008-2009, I quit rebalancing it. When it finally got back to even, I said, "OK, that's it, I'm done with it" and swapped it all for Total Stock. I'm not defending any of this, I'm just stating what I did. At that point, my VGSIX holding was perhaps 3% of my total portfolio, so it was a 3% exchange.

A few times I've moved to a different asset allocation by setting up automatic transfers that did a transfer every month for several years. Those might have involved a total exchange of as much as 10% but each individual transfer would have been a fraction of a percent.
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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by MotoTrojan » Wed Sep 13, 2017 4:44 pm

livesoft wrote:
Wed Sep 13, 2017 4:29 pm
MotoTrojan wrote:
Wed Sep 13, 2017 4:23 pm
What worries you about a larger exchange?
Say I move 10% from equities to bonds and equities go up another 10%. That means I have not gained another 1% in portfolio value which is a big deal when it comes to annual performance.

But if I move 1% and equities go up another 10%, then I have not gained 0.1% in portfolio value which is basically in the daily noise.

For me, it is not fear of losing money, but fear of missing out on gains ("lost appreciation" as daveydoo posted).

That's one reason why I can move 5% of portfolio value on a RBD.

I think another odd thing is that if one does 10 mini-rebalances instead of one big rebalance, then (by definition because of the frequency) one has a better chance to rebalance at the most opportune time. For instance, if I rebalance every single day in 2017, then I can state as a fact that I rebalanced on the best day possible in 2017.
Rebalancing everyday means you hit the perfect day, but would result in less gains in an up-market, due to momentum loss... with your thought process I assume that would concern you too (and thus justify having rebalance bands of say 5%, but with a strict rule to balance fully to AA).

Also what if your equities are up 10% above your AA, and the market goes down 10%? Wouldn't you have rather rebalanced?

Your fear of losing gains, but lack of fear of losing money, seems very irrational to me. With that logic, why hold any bonds at all?

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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by Toons » Wed Sep 13, 2017 4:47 pm

0
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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by livesoft » Wed Sep 13, 2017 4:50 pm

MotoTrojan wrote:
Wed Sep 13, 2017 4:44 pm
Also what if your equities are up 10% above your AA, and the market goes down 10%? Wouldn't you have rather rebalanced?
If the market goes down by 10%, I would have rebalanced on the way down and overrebalanced on a RBD.
Your fear of losing gains, but lack of fear of losing money, seems very irrational to me. With that logic, why hold any bonds at all?
I don't have the same level of irritation by missing out on ungained gains and by losing money. At least with losing money, I can do something about it: I can exchange from bonds into equities.

I will also add that I suspect people get squeamish when they exchange a few hundred thousand dollars versus exchanging a few tens of thousands of dollars.
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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by selftalk » Wed Sep 13, 2017 4:53 pm

By rebalancing you are controlling your risk level that you previously set up in your IPS. What`s so wrong with that ? Seeing what you sold going up higher in value after rebalancing hurts emotionally and gets your greed surfacing. That`s why investing correctly is simple yet hard to do. Warren Buffett has the same problem as I saw in an interview with Becky Quick on utube. He didn`t appear to be emotionally hurt though. After all he made a lot on the transaction that probably eased any emotional pain he may have experienced.

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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by MotoTrojan » Wed Sep 13, 2017 4:57 pm

livesoft wrote:
Wed Sep 13, 2017 4:50 pm
MotoTrojan wrote:
Wed Sep 13, 2017 4:44 pm
Also what if your equities are up 10% above your AA, and the market goes down 10%? Wouldn't you have rather rebalanced?
If the market goes down by 10%, I would have rebalanced on the way down and overrebalanced on a RBD.
If it went down 10% in a day without you being able to rebalance on the way down, you'd be overexposed and take a bigger loss than your AA was sized for.

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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by Chuck » Wed Sep 13, 2017 4:57 pm

I don't know what use this number is, but for me it's about 3%.

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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by retiredjg » Wed Sep 13, 2017 4:59 pm

My percentage is usually very small - less than 1%. My portfolio does not wander from target much because I take my living expenses withdrawals from the "doing well" side of the fence.

I made a big move (for me) today - almost 2%. It was haircut time and I trimmed it a little shorter than usual - 2% instead of maybe 1% or so - but still well within my 5% bands.

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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by livesoft » Wed Sep 13, 2017 5:00 pm

MotoTrojan wrote:
Wed Sep 13, 2017 4:57 pm
If it went down 10% in a day without you being able to rebalance on the way down, you'd be overexposed and take a bigger loss than your AA was sized for.
I'm laughing. If it went down by 10% in one day and I couldn't rebalance on the way down, then I would be delighted as I would not have been throwing good money away. I'd expect to be able to rebalance all at once soon enough. I imagine a 10% drop in one day would qualify as a RBD, too.
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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by nedsaid » Wed Sep 13, 2017 5:21 pm

In early 2000, my retirement portfolio was 94% stocks and 6% bonds and cash. About half of my stocks were in mutual funds and about the other half were individual stocks. I was an avid listener to Bob Brinker at the time and I learned about do-it-yourself investing through no-load mutual funds from him. He also talked a lot about indexing. He was getting more and more antsy about the market and in early 2000, put a sell signal on both US and International Stock Markets. At the same time, I was learning about portfolio theory and I realized I was hanging way out there in terms of risk.

So here is what I did, I sold about 30% of my stock mutual funds and took that to cash. My individual stocks I left alone. In broad terms, that was a portfolio shift of about 14%. So that took me down to 80% stocks and 20% bonds and cash. Later on, in a couple of steps, I redeployed that cash into bonds. Those shifts from cash to bonds were probably a total of less than 10% of my portfolio.

Starting in July 2013, I embarked on a mild rebalancing program from stocks to bonds. During that time, I reduced my stock allocation from 69% down to 67%. If I had done nothing and let my portfolio drift, I would probably be at 75% stocks today. So I have been rebalancing in waves in a rising stock market. Each wave is probably 0.30% to 0.50% of my portfolio, a recent wave was closer to 1.0%. This is why I call it mild rebalancing. Bit by bit, it has really added up.

Another thing I did was de-emphasize individual stocks. In early 2000, they were probably 45% or so of my portfolio. Today, they are 12.5% or so. Most of my new monies for investment since 1999 went into index funds, today probably 35% or so of my portfolio is indexed. The expense ratios on my mutual funds have been worked down from about 0.75% or so down to 0.48% today.
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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by BogleMelon » Wed Sep 13, 2017 5:31 pm

daveydoo wrote:
Wed Sep 13, 2017 4:27 pm
I did 12.5% in a single transaction about a year or two ago, purely for the purpose of re-balancing -- things had gotten more lop-sided than I realized. It was the "right" thing to do, BH-wise. Cost me a fortune in lost appreciation ever since, but I keep telling myself that it was the right thing to do :D . Have done a couple of 2.5% since then. Each one has cost/lost me money. But each one was the right thing to do. Gotta keep tellin' myself that...
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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by MotoTrojan » Wed Sep 13, 2017 5:32 pm

livesoft wrote:
Wed Sep 13, 2017 5:00 pm
MotoTrojan wrote:
Wed Sep 13, 2017 4:57 pm
If it went down 10% in a day without you being able to rebalance on the way down, you'd be overexposed and take a bigger loss than your AA was sized for.
I'm laughing. If it went down by 10% in one day and I couldn't rebalance on the way down, then I would be delighted as I would not have been throwing good money away. I'd expect to be able to rebalance all at once soon enough. I imagine a 10% drop in one day would qualify as a RBD, too.
Not sure what's funny. My example was meant to be N occurrence while you're 10% over your AA in equity, thus you lose more than you would at nominal during that crash, and thus have less bonds to rebalance with as well.

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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by livesoft » Wed Sep 13, 2017 5:41 pm

^I would not be 10% over in my equity allocation except after an RBD and then for only a few days. I suspect that's why I assumed for the 10% drop you wrote about that I started out in balance and the 10% drop put my equities way lower than where I like them.
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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by jainn » Wed Sep 13, 2017 5:46 pm

I have a trading bug from time to time...and perform tactical allocation, 10% of our portfolio, only temporary.

To stay at our 70/30 asset allocation, we spend 100% of all stock fund dividends, and sell stock fund shares to cover the difference of our spending plus taxes. We do not touch our bond funds, just reinvest their dividends.

When I believe there is an opportunity, i.e. chance to make 3-5% within a 1-3 month period compared to fixed income, I move 10% of our portfolio from our bond fund to our stock fund, and then back... I would call it gambling, but we only have this fixed income sitting here untouched as ballast and to keep total portfolio standard deviation lower....I expect any 'chance' we take to not ever result in permanent loss (i.e. what gambling could result).

If market drops after this 10% allocation change, I just hold and wait...disappointed in my mistiming...knowing we are 'stuck' with higher equity allocation than desired over the foreseeable future...if it goes up over short period of time, I move it all back including the extra 3-5%, back into bonds. Our longest waiting period has been 7 months.

I have done this twice a year, but not guaranteed will always be 2x a year, just has worked out that way. I wouldn't want to do it more than 2-3x/year anyways due to the time periods required to wait and my preference for this to be temporary. Earlier in February we gained 1.5% on the 'trade of our 10% allocation'. In hindsight we would have made a lot more holding another few weeks, but again, the trading isn't being done to bet on tops or bottoms...possibly just momentum would be the right definition.

As luck would have it, the 2nd trade this year recently finished, buying middle of last month and selling yesterday. Over the past 31 day period we received 3.26% gain on the buy/sell (this is net-net, and accounts for bond fund prices rising slightly over this period, and the interest that would have been accrued).
Vanguard has 30 day rule not allowing you exchange back into something you recently sold, so we patiently wait...if equities jumped a lot within first few days or weeks, I would consider switching it to MMF, or mailing in letter to exchange back, as a workaround to the frequent trading rule.

In summary, this is more about being able to say I made some money out of thin air than anything else..plus I haven't found any hobbies that preoccupy my time better, and I find enjoyment from the "research" that I do that occurs before/after the tactical allocation decision...this recent 3.26% gain on 10% of our portfolio, is still just 0.326% more money for the year than we would have had otherwise if I didn't play with it, not ground breaking. But since the trade is a low 7 digit transaction, it does provide a smile when it works.

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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by livesoft » Wed Sep 13, 2017 5:50 pm

@Jainn, sounds similar to the RBD strategy discussed from time to time on the bogleheads forum. Thanks for sharing.
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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by triceratop » Wed Sep 13, 2017 5:52 pm

I have rebalanced exactly once since I began investing in August 2014 (I use 5/25 bands which in all cases but US TSM is the 25 rule), because at my low portfolio size usually monthly contributions keep me in balance. I rebalanced (via usual year-end tax gain harvesting) 5% of total portfolio in December 2016, US SCV -> Intl Small. I bought VSS at $93.14; feeling pretty good about that for two reasons: 1) US SCV up 0.78%, VSS up 24.64% 2) I bought VSS at the same price I bought it for in June.
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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by MotoTrojan » Wed Sep 13, 2017 5:58 pm

livesoft wrote:
Wed Sep 13, 2017 5:41 pm
^I would not be 10% over in my equity allocation except after an RBD and then for only a few days. I suspect that's why I assumed for the 10% drop you wrote about that I started out in balance and the 10% drop put my equities way lower than where I like them.
Huh? You're never 10% OVER? Isn't that the full premise of your fear of lost gains? A fear of selling equity only to then have it go up more?

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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by livesoft » Wed Sep 13, 2017 6:01 pm

MotoTrojan wrote:
Wed Sep 13, 2017 5:58 pm
Huh? You're never 10% OVER? Isn't that the full premise of your fear of lost gains? A fear of selling equity only to then have it go up more?
That's right. Just because I have a fear does not mean that it controls me completely.
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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by JBTX » Wed Sep 13, 2017 6:07 pm

Hard for me to say. Rarely do I make a move over 1 or 2%. That said my allocations can float plus or minus a few percent and i don't sweat it.

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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by badbreath » Wed Sep 13, 2017 7:39 pm

I actually have never rebalanced my portfolio
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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by Dottie57 » Wed Sep 13, 2017 8:00 pm

In 401k, I purposely changed asset allocation earlier in the year. So about a 10% change.

Usually I don't rebalance, but change where new money goes.

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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by KlangFool » Wed Sep 13, 2017 8:01 pm

OP,

As far as I can remember, 2%.

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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by Peter Foley » Wed Sep 13, 2017 8:39 pm

My investment policy statement dates back to the end of the great recession and indicates 5% bands. I don't slice and dice. I've only really rebalanced a couple times, about 2% to 3% each time. This is not something I have tracked .

As I have read, I have come to favor a slightly high equity allocation based on a very positive sequence of returns since we retired in 2012.

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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by Pranav » Wed Sep 13, 2017 8:49 pm

Instead of rebalancing, we have been using new contributions to maintain the desired Asset Allocation.
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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by JeepDaze » Wed Sep 13, 2017 8:53 pm

I'm currently 84/16 stock/bond. My target is 80/20. I'll contemplate rebalancing if I hit 85/25.

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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by grabiner » Wed Sep 13, 2017 9:16 pm

My largest rebalancing moves have been 4% of my portfolio. I moved from bonds to stock in October 2008 near the market bottom (going from 86/14 back to my target 90/10), and from US stock to foreign stock in my 2015 annual rebalance (going from 47/39 to 43/43, with 10% in REITs and 4% in bonds).

One reason I don't have many large rebalancing moves is that I rebalance with new money and dividends. Whenever I have enough money to add to my taxable account, I invest in the most underweighted fund that I can hold in the taxable account. (Currently, that is international small-cap, because I sold some shares to buy a car in order to minimize the capital gain.)
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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by dwickenh » Wed Sep 13, 2017 9:29 pm

Pranav wrote:
Wed Sep 13, 2017 8:49 pm
Instead of rebalancing, we have been using new contributions to maintain the desired Asset Allocation.
This.

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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by daveydoo » Thu Sep 14, 2017 1:05 am

dwickenh wrote:
Wed Sep 13, 2017 9:29 pm
Pranav wrote:
Wed Sep 13, 2017 8:49 pm
Instead of rebalancing, we have been using new contributions to maintain the desired Asset Allocation.
This.

Dan
This is how I got so out of balance (my earlier post above). When you're in the latter half of your career, changing contributions just doesn't move the needle fast enough. I fooled myself into thinking that was sufficient for me but instead of righting the ship, I just got further behind. If you're just starting or early career, I'm sure it's fine.

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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by sergeant » Thu Sep 14, 2017 1:19 am

When I retired 18 months ago my RHS account was credited with a pretty big dollar amount equal to all my accrued sick, vacation, and comp time off multiplied by my hourly pay. The only decent fund alternative in our plan was a broad market index fund which has a low ER. This took my 50/50 AA closer to 60/40. It took me until this week to finally rebalance another part of my portfolio to get back to 50/50. I guess the delay helped "juice" my return during this time about 1%. :) I feel better at 50/50 now.
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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by celia » Thu Sep 14, 2017 3:11 am

My biggest portfolio change was 100% in the year after I began contributing to Roths. Once I had maxed out the maximum contribution of $1,500 for two years, I moved the assets in my money market fund to a stock fund since I then had the minimum amount to buy a stock fund. :beer

Livesoft, Are you sure you NEVER have changed more than 5%?

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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by The Wizard » Thu Sep 14, 2017 3:33 am

celia wrote:
Thu Sep 14, 2017 3:11 am
My biggest portfolio change was 100% in the year after I began contributing to Roths. Once I had maxed out the maximum contribution of $1,500 for two years, I moved the assets in my money market fund to a stock fund since I then had the minimum amount to buy a stock fund. :beer
I think that's more a contribution strategy than a rebalancing move.
Plus you probably had some money in your employer's retirement plan, yes?
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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by SimplicityNow » Thu Sep 14, 2017 7:32 am

Back in 2006/7 I went from about 75%-80 stocks at about 35%-40% stocks. This wasn't due to some prescient moment of what was to come but in an attempt to preserve investments in the short term for what was the potential for some very large family medical expenses. Obviously it worked to my advantage (in the short term) even more so when those potential medical expenses didn't materialize for the most part.

An unfortunate side effect was that for many years after that I remained at that very conservative allocation and failed to capture the beginning of the bull market that is still going on. A great personal example of how market timing doesn't work. Still, the less aggressive allocation gave me a lot of peace of mind when I needed it.

Today my IPS says to rebalance when I am 5% or more above or below my AA. I don't specify in my IPS how to accomplish that but I feel I wouldn't be comfortable doing it 5% all at once. After all it didn't get out of balance all at once either. Whether or not that makes financial sense I have no idea but I think when I rebalance it would be in 1-2% increments over a period of 3-6 months. No justification for that other then I feel I would sleep well at night.

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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by rkhusky » Thu Sep 14, 2017 7:33 am

I usually check my AA every two weeks when my 401K contribution hits and my rebalances are usually less than 1%. I adjust my AA annually to match my chosen glide path and that is when the larger rebalances typically happen. However, earlier this week I found that I may have the chance to retire a number of years earlier than planned and so made a 6% shift of stocks to bonds in anticipation. Once I know for sure, I will revise my glide path again and make another similar transfer. The move was made psychologically easier by the fact that the market is at all time highs and I was moving from stocks to bonds.

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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by Dandy » Thu Sep 14, 2017 8:45 am

Maybe 1% or 2% a bit higher on a rare occasion. Not a believer in making massive investment moves of equities vs fixed income or in fussing too much with sub accounts. I see my role, in retirement and seeming to have "enough", as keeping my equity allocation between 40 and 43%. But, even in the accumulation years I would make relatively small rebalance moves and maybe adjust future contributions rather than make a massive move.

The key to me is keeping the major risk -- equities, in a relatively tight range. I tend to be more aggressive in making adjustments when equities are below the target than when they are above. I would also tend to rebalance to near the top of the equity target range rather than to the lower end e.g. if equities when to 44% I would rebalance to 42.5% rather than 40%.

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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by livesoft » Thu Sep 14, 2017 9:22 am

Thanks for all the responses. It seems that the majority of respondents (and by extrapolation the majority of investors) exchange less than 2% and probably no more than 1% of total portfolio value when doing a rebalancing that involves moving money within the portfolio as opposed to an "on-the-fly" rebalancing done when contributing or withdrawing.

That might lead to a better rule-of-thumb for rebalancing instead of something like the 5/25 (or is it 25/5?) idea or rebalancing on a calendar date:

Don't rebalance until you must exchange around 1% of total portfolio value between equities and fixed income.
-or-
Rebalance before you have to exchange more than 2% of total portfolio value.
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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by JW-Retired » Thu Sep 14, 2017 9:47 am

dwickenh wrote:
Wed Sep 13, 2017 9:29 pm
Pranav wrote:
Wed Sep 13, 2017 8:49 pm
Instead of rebalancing, we have been using new contributions to maintain the desired Asset Allocation.
This.

Dan
Same here. We are content with slow changes. Minimal exchanges to rebalance for the last 15-20 years. Prior to retirement we rebalanced only with new contributions and since then it's been via re-investment of RMDs (and some one time appreciated stock gifting to the kiddos helped a little). This is very slow compared to livesoft exchanges but it does get us back near our notional 60/40 target AA quicker than one might guess. In 2008/09 our AA bottomed out at 48/52 and now it's around 65/35. Close enough! Actually, after October 2008 our equities were only below a 5% rebalancing band target for about 1 year.

Whatever the market does I guess we will continue being turtle rebalancers.
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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by El Greco » Thu Sep 14, 2017 10:14 am

35%. Until last year I was 95% stock, but when I realized I was only 3 or 4 years from retirement, I found religion (and the Bogleheads). 8-)

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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by Ethelred » Thu Sep 14, 2017 10:16 am

So, I have two answers this:

1. I've actually rebalanced very little. I made some minor asset allocation changes during the year, and rebalanced the unchanged assets slightly as part of those changes, but I don't count asset allocation changes as rebalancing. The rebalancing part was probably less than 1% of total portfolio.

2. The rebalancing strategy in my IPS is based on this article from Michael Kitces: https://www.kitces.com/blog/best-opport ... hresholds/
It's based on relative percentages, allowed to drift until thresholds are reached, and I check it monthly. I will rebalance any asset that reaches above 120% or below 83% (= 6/5 or 5/6) of target. Fixed income is 30% of the portfolio, and I treat it as a single asset, whereas the individual components of the equity allocation are 15% or smaller. So, assuming that the largest rebalancing is in a market drop, when fixed income is rebalanced from 30%*120% (=36%) to 30%, then the largest rebalancing percentage will be 6%, or maybe a little higher.

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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by TSR » Thu Sep 14, 2017 10:36 am

Sorry for the odd response, but I have the majority of my portfolio in my TSP in a "lifecycle" fund, so it rebalances on its own. My Roth is in a three-fund configuration, and I just exchanged approximately 8% of the Roth to rebalance and slightly adjust my allocation (I just had a birthday). This only represents about 1.5% of my TOTAL portfolio, but it felt like a lot more because it was the only part of my portfolio that I have control over.

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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by letsgobobby » Thu Sep 14, 2017 11:04 am

livesoft wrote:
Wed Sep 13, 2017 4:18 pm
madsinger reported that he rebalanced yesterday: viewtopic.php?p=3530662#p3530662

That led to an interchange where neither one of us likes to move more than about a percent or two of our portfolios at once in a rebalancing move. That is, large moves are not for us.

I can guess that most people do not move even 5% at a time even though those 5/25 bands are discussed now and then.

So what's the largest percentage of your total portfolio value that you have exchanged in a rebalancing move? 1%? 5% 10%? Never rebalanced?
Between March 2008 and May 2009 I increased my stock allocation from 25% to 70%. In any given day I moved 7-10%, and more than once. Since then not more than 5%, and I think only once.

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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by MotoTrojan » Thu Sep 14, 2017 12:08 pm

letsgobobby wrote:
Thu Sep 14, 2017 11:04 am

Between March 2008 and May 2009 I increased my stock allocation from 25% to 70%. In any given day I moved 7-10%, and more than once. Since then not more than 5%, and I think only once.
Nicely timed!

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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by triceratop » Thu Sep 14, 2017 12:16 pm

livesoft wrote:
Thu Sep 14, 2017 9:22 am
Thanks for all the responses. It seems that the majority of respondents (and by extrapolation the majority of investors) exchange less than 2% and probably no more than 1% of total portfolio value when doing a rebalancing that involves moving money within the portfolio as opposed to an "on-the-fly" rebalancing done when contributing or withdrawing.

That might lead to a better rule-of-thumb for rebalancing instead of something like the 5/25 (or is it 25/5?) idea or rebalancing on a calendar date:

Don't rebalance until you must exchange around 1% of total portfolio value between equities and fixed income.
-or-
Rebalance before you have to exchange more than 2% of total portfolio value.
Not sure why you suggest this as a particularly good strategy compared to the well-backtested 5/25 rule; is it just because it's what a lot of people do? If you believe in momentum then having such tight bands may in fact ding returns compared to the trip points set by the wider bands of a 5/25 (5% absolute band or 25% relative of any asset class or superclass like "equities" )

Just as an n=1 example, I recall you rebalancing out of US SCV too early last fall. Now it was purely a matter of waiting for lots to become long term that I waited until later in December, but it made a difference.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by livesoft » Thu Sep 14, 2017 12:50 pm

triceratop wrote:
Thu Sep 14, 2017 12:16 pm
Not sure why you suggest this as a particularly good strategy compared to the well-backtested 5/25 rule; is it just because it's what a lot of people do? If you believe in momentum then having such tight bands may in fact ding returns compared to the trip points set by the wider bands of a 5/25 (5% absolute band or 25% relative of any asset class or superclass like "equities" )

Just as an n=1 example, I recall you rebalancing out of US SCV too early last fall. Now it was purely a matter of waiting for lots to become long term that I waited until later in December, but it made a difference.
Yes, it is just because it's what people seem to be able to do.

It is true that I sold some VBR in November, but I overloaded on it earlier in September, so I needed to rebalance. Also I kept a fare amount of those September shares. Then in Jan/Feb, I exchanged all my Roth SCV into VSS and VFSVX for the double win (2016 + 2017).

There is something deeply satisfying when your highest gains occur in your Roth IRAs.
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Re: What is the largest percentage of your total portfolio value that you have exchanged to rebalance?

Post by triceratop » Thu Sep 14, 2017 1:00 pm

It's less satisfying when moving things like VSS to your Roth instead of VBR for tax efficiency reasons dings you due to unlucky timing. My Roth returns have not been stellar, but at this point it's like 8% of my portfolio so I also don't care.

Overall my timing of buys has been pretty beneficial. I didn't buy enough EM in winter 2016 though, but I was buying TISM.
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