Anybody hit their rebalance bands?

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JaySayms
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Anybody hit their rebalance bands?

Post by JaySayms » Fri Feb 09, 2018 1:13 pm

I was surprised to see that I hadn't hit my rebalance bands for overall stock to bonds ratio after the last weeks' dips. I have them set at 5% and I only ended up around 2.5% today. I decided to rebalance anyways as it looked like a reasonable time to do so after a 10% correction.

This may seem like a simple question, but are your rebalance bands tighter than mine? Do you "cheat" and rebalance anyways when we see a market correction big enough? I found myself questioning my rebalance bands and was just curious what other novices and experts alike do out there.

Thanks.

Jay

Soon2BXProgrammer
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Re: Anybody hit their rebalance bands?

Post by Soon2BXProgrammer » Fri Feb 09, 2018 1:42 pm

JaySayms wrote:
Fri Feb 09, 2018 1:13 pm
I was surprised to see that I hadn't hit my rebalance bands for overall stock to bonds ratio after the last weeks' dips. I have them set at 5% and I only ended up around 2.5% today. I decided to rebalance anyways as it looked like a reasonable time to do so after a 10% correction.

This may seem like a simple question, but are your rebalance bands tighter than mine? Do you "cheat" and rebalance anyways when we see a market correction big enough? I found myself questioning my rebalance bands and was just curious what other novices and experts alike do out there.

Thanks.

Jay
because i'm lazy. my IPS says i'm supposed to evaluate that quarterly. .. i don't have to worry until end of march/beginning of april

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HomerJ
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Re: Anybody hit their rebalance bands?

Post by HomerJ » Fri Feb 09, 2018 1:46 pm

I don't have a set number, but probably around 3%-5%...

I'm 50/50... I only check once a month... If I was at 53%-55% stocks, I'd usually sell some to get back to 50%.

I was already at 52% or 53% before this correction happened, so I'm basically back to 49/51 at this point.

So no rebalancing for me.

remomnyc
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Re: Anybody hit their rebalance bands?

Post by remomnyc » Fri Feb 09, 2018 2:04 pm

I didn't trigger my 5% bands either, but I still have new money (401k contributions, match, dividends, interest) going in to rebalance.

TwstdSista
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Re: Anybody hit their rebalance bands?

Post by TwstdSista » Fri Feb 09, 2018 2:13 pm

Unlikely for me since I just got to my exact 70/30 allocation on Tuesday. Looking forward to next month's Roth contribution!

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Tamarind
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Re: Anybody hit their rebalance bands?

Post by Tamarind » Fri Feb 09, 2018 2:18 pm

I haven't had to rebalance since I established my IPS in 2016. On the way up, because of new money going in. Now because I had all those un-rebalanced stock holdings that had been appreciating making my band "wider".

This episode has really been a great demo for me on why rebalancing bands are helpful.

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Earl Lemongrab
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Re: Anybody hit their rebalance bands?

Post by Earl Lemongrab » Sat Feb 10, 2018 1:11 pm

I ran the Feb numbers yesterday. REIT actually hit.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

BogleMelon
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Re: Anybody hit their rebalance bands?

Post by BogleMelon » Sat Feb 10, 2018 1:18 pm

I didn't hit my bands, I use 5/25 rule (http://awealthofcommonsense.com/2014/03 ... cing-rule/)..
I will contribute to my Roth in 2 weeks, so I will rebalance with new money anyways.
My IPS telling me to not to rebalance with old money till I hit the band, so I am staying to my course. No cheating for me.
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

onourway
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Re: Anybody hit their rebalance bands?

Post by onourway » Sat Feb 10, 2018 1:19 pm

I last checked Dec. 29 for end of year. I checked again yesterday after so many people were saying they'd hit theirs. Ours hadn't moved a single point. Made me double check my calculations, but basically it was just new money coming in, plus the bulk of this 'loss' was just January's 'gain' that I'd never accounted for in the first place.

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kenyan
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Re: Anybody hit their rebalance bands?

Post by kenyan » Sat Feb 10, 2018 1:27 pm

Nope. A little sad that I moved $20k of new money in just before the fall, but it happens. Just will look to TLH it later (can't now due to other purchases).
Retirement investing is a marathon.

22twain
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Re: Anybody hit their rebalance bands?

Post by 22twain » Sat Feb 10, 2018 1:40 pm

My target for stock is currently 46%, with a ±5% rebalancing band. A couple of weeks ago I hit the top of the band (51%) and figured I'd better rebalance soon. Then the market dropped. Now I'm at 49.5%. Assuming bonds stay flat, stocks will have to drop about another 29% before I hit the bottom of the band (41%). So it looks like I'll be doing nothing for a while.
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deikel
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Re: Anybody hit their rebalance bands?

Post by deikel » Sat Feb 10, 2018 3:02 pm

I hit my band in late January and moved US stocks into bonds and INT and took 2018 contributions into account as stocks as well....lucky me, larger portion was protected from the recent looptiloop...but it overall makes little difference
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jebmke
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Re: Anybody hit their rebalance bands?

Post by jebmke » Sat Feb 10, 2018 3:06 pm

Not yet
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nodenuff2
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Re: Anybody hit their rebalance bands?

Post by nodenuff2 » Sat Feb 10, 2018 3:31 pm

I rebalanced late December nowhere near needing to again.
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am
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Re: Anybody hit their rebalance bands?

Post by am » Sat Feb 10, 2018 4:16 pm

I didn’t because I got 10% bands. This makes rebalancing rare and less than this doesn’t matter (arguably even 10% doesn’t matter).

Woodshark
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Re: Anybody hit their rebalance bands?

Post by Woodshark » Sat Feb 10, 2018 4:22 pm

Mine were getting close and I was about to rebalance but the market did it for me.

balbrec2
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Re: Anybody hit their rebalance bands?

Post by balbrec2 » Sat Feb 10, 2018 4:31 pm

Soon2BXProgrammer wrote:
Fri Feb 09, 2018 1:42 pm
JaySayms wrote:
Fri Feb 09, 2018 1:13 pm
I was surprised to see that I hadn't hit my rebalance bands for overall stock to bonds ratio after the last weeks' dips. I have them set at 5% and I only ended up around 2.5% today. I decided to rebalance anyways as it looked like a reasonable time to do so after a 10% correction.

This may seem like a simple question, but are your rebalance bands tighter than mine? Do you "cheat" and rebalance anyways when we see a market correction big enough? I found myself questioning my rebalance bands and was just curious what other novices and experts alike do out there.

Thanks.

Jay
because i'm lazy. my IPS says i'm supposed to evaluate that quarterly. .. i don't have to worry until end of march/beginning of april
I'm lazy also
quarterly review minimum 10% rebalance trigger
6 weeks to go

Soon2BXProgrammer
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Re: Anybody hit their rebalance bands?

Post by Soon2BXProgrammer » Sat Feb 10, 2018 4:44 pm

balbrec2 wrote:
Sat Feb 10, 2018 4:31 pm
Soon2BXProgrammer wrote:
Fri Feb 09, 2018 1:42 pm
JaySayms wrote:
Fri Feb 09, 2018 1:13 pm
I was surprised to see that I hadn't hit my rebalance bands for overall stock to bonds ratio after the last weeks' dips. I have them set at 5% and I only ended up around 2.5% today. I decided to rebalance anyways as it looked like a reasonable time to do so after a 10% correction.

This may seem like a simple question, but are your rebalance bands tighter than mine? Do you "cheat" and rebalance anyways when we see a market correction big enough? I found myself questioning my rebalance bands and was just curious what other novices and experts alike do out there.

Thanks.

Jay
because i'm lazy. my IPS says i'm supposed to evaluate that quarterly. .. i don't have to worry until end of march/beginning of april
I'm lazy also
quarterly review minimum 10% rebalance trigger
6 weeks to go
the one thing i haven't figured out with being lazy, is how to be told if i have a TLH opportunity in taxable, without manually keeping track.

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oldcomputerguy
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Re: Anybody hit their rebalance bands?

Post by oldcomputerguy » Sat Feb 10, 2018 4:50 pm

My rebalance point is +/- 5% off of a 50/50 allocation. Didn't even come close.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

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grabiner
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Re: Anybody hit their rebalance bands?

Post by grabiner » Sat Feb 10, 2018 5:01 pm

A 5% rebalance band gives you a lot more room within the band than would be used by a 10% market drop. Before the drop, you should have been at the middle or on the high side of your rebalancing bands, given that the market was up in January and you either rebalanced then or were still within the bands. Now, to move from 50/50 to 45/55 requires an 18% decline in the stock market (or 10% decline in the stock market and 10% increase in the bond market). To move from 80/20 to 75/25 requires a 25% decline in the stock market.

Since I rebalance annually to my target allocation, I have only hit rebalancing bands twice. In October 2008, the declining market took me from my target 90/10 to 86/14, and my band for a major asset class such as bonds is 25% of the target allocation, so I sold bonds to by some stock. In late 2009, my REIT allocation, which I had rebalanced to 10% at the bottom of the crash, went over 15% and I had to sell some REITs.
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SCV_Lawyer
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Re: Anybody hit their rebalance bands?

Post by SCV_Lawyer » Sat Feb 10, 2018 5:19 pm

It's not that surprising that people aren't hitting rebalancing bands yet. For a 50/50 portfolio, assuming bonds stay flat, stocks would have to decrease by 18% (our increase by 22%) to cross one of the bands. A little more for 70/30, which would be a 20% decrease or 29% increase. And if one is allocating new contributions to the fallen assets (or if bonds are moving in the same direction as stocks, as they are now), even more of a move is required.

I was at 61/39 at the peak and went down to 59/41 as of Friday.

Edit: And I see grabiner made the same point right above me.

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Lieutenant.Columbo
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Re: Anybody hit their rebalance bands?

Post by Lieutenant.Columbo » Sat May 26, 2018 6:43 am

grabiner wrote:
Sat Feb 10, 2018 5:01 pm
[...]I rebalance annually to my target allocation, I have only hit rebalancing bands twice. In October 2008, the declining market took me from my target 90/10 to 86/14, and my band for a major asset class such as bonds is 25% of the target allocation, so I sold bonds to by some stock. In late 2009, my REIT allocation, which I had rebalanced to 10% at the bottom of the crash, went over 15% and I had to sell some REITs.
and, elsewhere, around a month earlier
grabiner wrote:
Thu Jan 04, 2018 7:36 pm
Here is what I have in my Investment Policy Statement:
"I will do a full rebalance annually, when I make my annual IRA contribution. I will pay capital gains tax to rebalance in a taxable account only if a major asset class [US stock, foreign stock, real estate, bonds] or subclass would otherwise be off by more than 5% of my total allocation, or a major asset class would be off by more than 25% of its own target allocation, and I do not expect that normal inflows will fix that allocation problem. I will rebalance tax-deferred accounts freely to get as close as possible to the target allocation."

Thus, with a target bond allocation of 8%, I use the 25% rule to get a rebalancing range of 6-10%. With a target allocation to large-cap emerging markets (a subclass held entirely in my taxable account) of 10%, I use only the 5% rule to get a rebalancing range of 5%-15%. I have never hit a rebalancing limit requiring a taxable transaction, although I came close in 2007 in emerging markets.
and since yesterday
livesoft wrote:
Fri May 25, 2018 11:21 am
I comment pretty regularly that I think rebalancing once-a-year by using a date on a calendar is unwise. Don't studies show it doesn't really help one?
David,
You rebalance once a year AND whenever else you hit your rebalancing bands.
Would you mind explaining why not just the latter approach?
Thank you.
L.C.

Note: Not trying to stir up a debate or confrontation between Grabiner and livesoft, only wanting to learn from both of them.
Lt. Columbo: Well, what do you know. Here I am talking with some of the smartest people in the world, and I didn't even notice!

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grabiner
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Re: Anybody hit their rebalance bands?

Post by grabiner » Sat May 26, 2018 4:21 pm

Lieutenant.Columbo wrote:
Sat May 26, 2018 6:43 am
grabiner wrote:
Sat Feb 10, 2018 5:01 pm
[...]I rebalance annually to my target allocation, I have only hit rebalancing bands twice. In October 2008, the declining market took me from my target 90/10 to 86/14, and my band for a major asset class such as bonds is 25% of the target allocation, so I sold bonds to by some stock. In late 2009, my REIT allocation, which I had rebalanced to 10% at the bottom of the crash, went over 15% and I had to sell some REITs.
and, elsewhere, around a month earlier
grabiner wrote:
Thu Jan 04, 2018 7:36 pm
Here is what I have in my Investment Policy Statement:
"I will do a full rebalance annually, when I make my annual IRA contribution. I will pay capital gains tax to rebalance in a taxable account only if a major asset class [US stock, foreign stock, real estate, bonds] or subclass would otherwise be off by more than 5% of my total allocation, or a major asset class would be off by more than 25% of its own target allocation, and I do not expect that normal inflows will fix that allocation problem. I will rebalance tax-deferred accounts freely to get as close as possible to the target allocation."

Thus, with a target bond allocation of 8%, I use the 25% rule to get a rebalancing range of 6-10%. With a target allocation to large-cap emerging markets (a subclass held entirely in my taxable account) of 10%, I use only the 5% rule to get a rebalancing range of 5%-15%. I have never hit a rebalancing limit requiring a taxable transaction, although I came close in 2007 in emerging markets.
and since yesterday
livesoft wrote:
Fri May 25, 2018 11:21 am
I comment pretty regularly that I think rebalancing once-a-year by using a date on a calendar is unwise. Don't studies show it doesn't really help one?
David,
You rebalance once a year AND whenever else you hit your rebalancing bands.
Would you mind explaining why not just the latter approach?
I give my portfolio an annual checkup, at which time I have to determine my current asset allocation. The checkup is made when I make my IRA contribution, since I need to decide where it goes. The checkup is also the time at which I make a planned allocation change (for example, decreasing my stock allocation as retirement gets closer). Therefore, it is a natural time to rebalance consistent with my risk tolerance. When I make a change in my asset allocation at any other time (for example, when buying a condo and taking out a mortgage changed my risk tolerance), I also adjust then.

Even when I am not doing a full rebalance, I have to decide where to put new money in my taxable account. If I am overweighted in US stock, I will put new taxable money in an international stock fund.

The bands are just to prevent market movements from getting things too far from the target.
Wiki David Grabiner

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Re: Anybody hit their rebalance bands?

Post by 3funder » Sun May 27, 2018 8:29 am

remomnyc wrote:
Fri Feb 09, 2018 2:04 pm
I didn't trigger my 5% bands either, but I still have new money (401k contributions, match, dividends, interest) going in to rebalance.
+1. New contributions help keep me within my 5% band, and, to be honest, even if it hit 5%, I'm not sure I'd feel the sudden urge to rebalance. I'm more interested in knowing that it hit the band than I am in tweaking my allocation.

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ruralavalon
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Re: Anybody hit their rebalance bands?

Post by ruralavalon » Sun May 27, 2018 9:01 am

No, we have not hit rebalancing bands.
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Lieutenant.Columbo
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Re: Anybody hit their rebalance bands?

Post by Lieutenant.Columbo » Sun May 27, 2018 12:44 pm

grabiner wrote:
Sat May 26, 2018 4:21 pm
Lieutenant.Columbo wrote:
Sat May 26, 2018 6:43 am
grabiner wrote:
Sat Feb 10, 2018 5:01 pm
[...]I rebalance annually to my target allocation, I have only hit rebalancing bands twice. In October 2008, the declining market took me from my target 90/10 to 86/14, and my band for a major asset class such as bonds is 25% of the target allocation, so I sold bonds to by some stock. In late 2009, my REIT allocation, which I had rebalanced to 10% at the bottom of the crash, went over 15% and I had to sell some REITs.
and, elsewhere, around a month earlier
grabiner wrote:
Thu Jan 04, 2018 7:36 pm
Here is what I have in my Investment Policy Statement:
"I will do a full rebalance annually, when I make my annual IRA contribution. I will pay capital gains tax to rebalance in a taxable account only if a major asset class [US stock, foreign stock, real estate, bonds] or subclass would otherwise be off by more than 5% of my total allocation, or a major asset class would be off by more than 25% of its own target allocation, and I do not expect that normal inflows will fix that allocation problem. I will rebalance tax-deferred accounts freely to get as close as possible to the target allocation."

Thus, with a target bond allocation of 8%, I use the 25% rule to get a rebalancing range of 6-10%. With a target allocation to large-cap emerging markets (a subclass held entirely in my taxable account) of 10%, I use only the 5% rule to get a rebalancing range of 5%-15%. I have never hit a rebalancing limit requiring a taxable transaction, although I came close in 2007 in emerging markets.
and since yesterday
livesoft wrote:
Fri May 25, 2018 11:21 am
I comment pretty regularly that I think rebalancing once-a-year by using a date on a calendar is unwise. Don't studies show it doesn't really help one?
David,
You rebalance once a year AND whenever else you hit your rebalancing bands.
Would you mind explaining why not just the latter approach?
I give my portfolio an annual checkup, at which time I have to determine my current asset allocation. The checkup is made when I make my IRA contribution, since I need to decide where it goes. The checkup is also the time at which I make a planned allocation change (for example, decreasing my stock allocation as retirement gets closer). Therefore, it is a natural time to rebalance consistent with my risk tolerance. When I make a change in my asset allocation at any other time (for example, when buying a condo and taking out a mortgage changed my risk tolerance), I also adjust then.

Even when I am not doing a full rebalance, I have to decide where to put new money in my taxable account. If I am overweighted in US stock, I will put new taxable money in an international stock fund.

The bands are just to prevent market movements from getting things too far from the target.
David,
Thank you for explaining how/why you rebalance annually.
Would you mind sharing...
1. ...why you didn't find the 25% (of an asset class' own target allocation) band alone (with no 5% band) enough for all scenarios and for all asset classes?
2. ...why you picked 25% and not, say 30% or 20%? I know the 25% band is often used/discussed here, but I'd like to now your own rationale for "25". If an arbitrary choice, that is fine, of course.
Short answers will do. Thank you.
Lt. Columbo: Well, what do you know. Here I am talking with some of the smartest people in the world, and I didn't even notice!

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grabiner
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Re: Anybody hit their rebalance bands?

Post by grabiner » Sun May 27, 2018 1:03 pm

Lieutenant.Columbo wrote:
Sun May 27, 2018 12:44 pm
Would you mind sharing...
1. ...why you didn't find the 25% (of an asset class' own target allocation) band alone (with no 5% band) enough for all scenarios and for all asset classes?
Because 25% makes for a very large deviation for some portfolios. If your target is 50% stock, you probably want to rebalance before you get to 63/37.

In fact, the 5% is my primary rule; any subclass which is off by 5% of my total portfolio gets rebalanced, as that is enough to make a significant difference. The 25% is for major asset classes which have small target allocations (bonds in my 92%-stock portfolio, REITs at 10%).
2. ...why you picked 25% and not, say 30% or 20%? I know the 25% band is often used/discussed here, but I'd like to now your own rationale for "25". If an arbitrary choice, that is fine, of course.
25% is arbitrary.
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Lieutenant.Columbo
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Re: Anybody hit their rebalance bands?

Post by Lieutenant.Columbo » Sun May 27, 2018 2:09 pm

grabiner wrote:
Sun May 27, 2018 1:03 pm
Lieutenant.Columbo wrote:
Sun May 27, 2018 12:44 pm
Would you mind sharing...
1. ...why you didn't find the 25% (of an asset class' own target allocation) band alone (with no 5% band) enough for all scenarios and for all asset classes?
Because 25% makes for a very large deviation for some portfolios. If your target is 50% stock, you probably want to rebalance before you get to 63/37.

In fact, the 5% is my primary rule; any subclass which is off by 5% of my total portfolio gets rebalanced, as that is enough to make a significant difference. The 25% is for major asset classes which have small target allocations (bonds in my 92%-stock portfolio, REITs at 10%).
2. ...why you picked 25% and not, say 30% or 20%? I know the 25% band is often used/discussed here, but I'd like to now your own rationale for "25". If an arbitrary choice, that is fine, of course.
25% is arbitrary.
thank you very much, sir
Lt. Columbo: Well, what do you know. Here I am talking with some of the smartest people in the world, and I didn't even notice!

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