Crash Plan

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bglhdism
Posts: 4
Joined: Tue Jun 05, 2018 7:42 am

Crash Plan

Post by bglhdism » Fri Oct 12, 2018 8:34 am

It seems I've only known the good life. I started in 2010 and thus far the plan has been very simple: keep buying and rebalance through these purchases.

But, I've never been through a crash (or even a bear) so in that situation, I don't know what I don't know. To be clear, this isn't an AA concern--more about having a clear plan of action. I'm writing my first IPS and the biggest question mark for me is rebalancing. In reading the forum I've found a wide spread of approaches e.g. at an X% drop, after X waiting period, after X threshold, start selling bonds at X point, etc. It would be great to hear from people with relevant experience:

1) what is a simple and easily actionable rebalancing plan, particularly for someone who's more of a set-it-and-forget-it type
2) my equity portion is on the higher end--if free cash is available, is that always preferable to selling bonds, assuming bonds are even or only have nominal gains/losses at that time?
3) is there anything else a first timer should prepare for (other than the sadness of watching a number get much smaller :D )

Sorry if this is well-trodden, but I hit a bit of information overload in trying to do research.
Last edited by bglhdism on Fri Oct 12, 2018 8:38 am, edited 1 time in total.

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BeBH65
Posts: 1236
Joined: Sat Jul 04, 2015 7:28 am

Re: Crash Plan

Post by BeBH65 » Fri Oct 12, 2018 8:38 am

Have a look at the Rebalancing page in our wiki; the 5/25 rule seems to be popular
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence).

jebmke
Posts: 8361
Joined: Thu Apr 05, 2007 2:44 pm

Re: Crash Plan

Post by jebmke » Fri Oct 12, 2018 8:39 am

If you have holdings, especially equity in a taxable account you should become familiar with tax loss harvesting (TLH) and have identified fund/ETF pairs to use to execute the swaps.
When you discover that you are riding a dead horse, the best strategy is to dismount.

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CyclingDuo
Posts: 1724
Joined: Fri Jan 06, 2017 9:07 am

Re: Crash Plan

Post by CyclingDuo » Fri Oct 12, 2018 8:45 am

bglhdism wrote:
Fri Oct 12, 2018 8:34 am
It seems I've only known the good life. I started in 2010 and thus far the plan has been very simple: keep buying and rebalance through these purchases.

But, I've never been through a crash (or even a bear) so in that situation, I don't know what I don't know. To be clear, this isn't an AA concern--more about having a clear plan of action. I'm writing my first IPS and the biggest question mark for me is rebalancing. In reading the forum I've found a wide spread of approaches e.g. at an X% drop, after X waiting period, after X threshold, start selling bonds at X point, etc. It would be great to hear from people with relevant experience:

1) what is a simple and easily actionable rebalancing plan, particularly for someone who's more of a set-it-and-forget-it type
2) my equity portion is on the higher end--if free cash is available, is that always preferable to selling bonds, assuming bonds are even or only have nominal gains/losses at that time?
3) is there anything else a first timer should prepare for (other than the sadness of watching a number get much smaller :D )

Sorry if this is well-trodden, but I hit a bit of information overload in trying to do research.
It's always good to review what you have actually been through since 2010. Quite a bit, actually, in terms of some corrective moves (many technicians would argue that mid 2015 to mid 2016 time frame was more than a garden variety correction)....

Image
https://www.yardeni.com/pub/sp500corrbear.pdf

How did you react in 2011? How about 2015-16? How about earlier this year? How about the current corrective move we have been in for three weeks?
"Everywhere is within walking distance if you have the time." ~ Steven Wright

KlangFool
Posts: 10153
Joined: Sat Oct 11, 2008 12:35 pm

Re: Crash Plan

Post by KlangFool » Fri Oct 12, 2018 8:50 am

OP,

Use a target date fund or Vanguard Lifestrategy fund. Then, you do not need to rebalance. It is fully automated.

KlangFool

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Cyclesafe
Posts: 658
Joined: Wed Dec 31, 2014 1:03 pm

Re: Crash Plan

Post by Cyclesafe » Fri Oct 12, 2018 9:05 am

This paper from Vanguard is useful

https://personal.vanguard.com/pdf/ISGPORE.pdf

The bottom line is that there is no evidence that any one plan is better than another. Annual or semi-annual monitoring with 5% bands is as good as any other strategy.

elderwise
Posts: 83
Joined: Fri Jul 22, 2016 10:27 am

Re: Crash Plan

Post by elderwise » Fri Oct 12, 2018 9:07 am

sorry not related to OP topic but came to the thread thinking it was about the CrashPlan software, it really has crashed.I used it a lot before before they switched to business only and went down the hole with their development.

bglhdism
Posts: 4
Joined: Tue Jun 05, 2018 7:42 am

Re: Crash Plan

Post by bglhdism » Mon Oct 15, 2018 11:18 am

Thanks for all the responses.
BeBH65 wrote:
Fri Oct 12, 2018 8:38 am
Have a look at the Rebalancing page in our wiki; the 5/25 rule seems to be popular
This is helpful and seems the most practical to me.
jebmke wrote:
Fri Oct 12, 2018 8:39 am
If you have holdings, especially equity in a taxable account you should become familiar with tax loss harvesting (TLH) and have identified fund/ETF pairs to use to execute the swaps.
I generally don't have sales of any taxable equities (just accumulating) so no gains. If I'm understanding correctly I can still use this to reduce my taxable income by the max of $3,000? So I should sell just enough to cross that threshold annually? Are there typical pairs people use for VTSAX and VTIAX, which are my only equity holdings?
CyclingDuo wrote:
Fri Oct 12, 2018 8:45 am

It's always good to review what you have actually been through since 2010. Quite a bit, actually, in terms of some corrective moves (many technicians would argue that mid 2015 to mid 2016 time frame was more than a garden variety correction)....

How did you react in 2011? How about 2015-16? How about earlier this year? How about the current corrective move we have been in for three weeks?
I have yet to have any reaction or desire to change course thus far. Nothing with the current dip either, though I think subconsciously the recent drop plus the length of the current rise is what's made me realize I need to wrap my head around what the opposite situation looks like...

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