I just rebalanced back to my AA. It gave me a little pause.

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Doc7
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I just rebalanced back to my AA. It gave me a little pause.

Post by Doc7 »

Investing has always been boring for me, which I take to be a sign that my asset allocation (below) is correct for me. I plan to hold this AA until we are both 40 in five years and then maintain Age minus 10 in bonds thereafter, per my IPS.

Today’s rebalance is the first time I ever felt a little adrenaline regarding my investments.

I am down $106K (Retirement account were 525K the last time I logged in December, and 419 today). My first recession was 08 but I only had 20-25K in retirement accounts at that time, my first year out of college.

I just rebalanced this morning and bought $34K in equities and sold the same in Total Bond market.

To get back to my AA of 70/30 with Equities being 65% TSM, 20% INT and 15% REIT it was +$10K to REIT, +$7500 to INT, and rest (16K) to TSM.

Time will tell if this was boneheaded.
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galeno
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Re: I just rebalanced back to my AA. It gave me a little pause.

Post by galeno »

Not bonehead at all.

You now have more shares than before at a cheaper price.

What's wrong with that?
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steve roy
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Re: I just rebalanced back to my AA. It gave me a little pause.

Post by steve roy »

With enough time it'll be fine. As for me, though my AA is off its normall 30/70, I'm neither selling nor buying. (Not even looking.)
livesoft
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Re: I just rebalanced back to my AA. It gave me a little pause.

Post by livesoft »

Presumably you used ETFs because if you used mutual funds where the trades will take place after today's market close, then how did you do the math to take into account the significantly different unknown NAVs that mutual funds will have later today?

I am considering rebalancing OUT of equities since I did my rebalancing before today on RBDs.
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RamblinDoc
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Re: I just rebalanced back to my AA. It gave me a little pause.

Post by RamblinDoc »

livesoft wrote: Tue Mar 24, 2020 10:25 am I am considering rebalancing OUT of equities since I did my rebalancing before today on RBDs.
First, glad to see you active again on the forum!

Second, are you now rebalancing out of equities because they are out of balance, or are you changing your desired asset allocation to be weighted less in equities?
livesoft
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Re: I just rebalanced back to my AA. It gave me a little pause.

Post by livesoft »

Because they may be out of balance. I will have to check how things play out later today. My desired AA for equities is unchanged.
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Doc7
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Re: I just rebalanced back to my AA. It gave me a little pause.

Post by Doc7 »

livesoft wrote: Tue Mar 24, 2020 10:25 am Presumably you used ETFs because if you used mutual funds where the trades will take place after today's market close, then how did you do the math to take into account the significantly different unknown NAVs that mutual funds will have later today?

I am considering rebalancing OUT of equities since I did my rebalancing before today on RBDs.

Well, jeez.

I use mutual funds for this (all of my rebalancing is almost entirely done in my 401K and VG Roth IRA)) and I don't really account for that, but how can I tell on a given day where it's going to end up at the next market close?
livesoft
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Re: I just rebalanced back to my AA. It gave me a little pause.

Post by livesoft »

Doc7 wrote: Tue Mar 24, 2020 10:58 am..., but how can I tell on a given day where it's going to end up at the next market close?
You can only estimate the change by looking at the changes in corresponding ETF shares a few minutes before the market close.
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Doc7
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Re: I just rebalanced back to my AA. It gave me a little pause.

Post by Doc7 »

Over the course of my life of investing, will it make very much difference if I do my rebalancing calculations when I am home from work (like today, but typically on a Saturday afternoon) and I am only dealing with the partial information of the price available at the moment I fill out my spreadsheet and submit change requests?


Like I said this is probably the first time I've ever had to make a a move more significant than "What do I do with the $3K I am putting in His and Hers Roth IRAs today?"

I can see that my AA might be 2-3% more aggressive than planned if the market ends up 8% Today.
livesoft
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Re: I just rebalanced back to my AA. It gave me a little pause.

Post by livesoft »

Who knows? If you intend to make a lot more contributions over your lifetime, then it probably won't make much difference. If you are a retiree with no more contributions to make, then it might make a big difference ... after all today should turn out to be one of the all-time up days for the stock market (so far).
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Doc7
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Re: I just rebalanced back to my AA. It gave me a little pause.

Post by Doc7 »

Well this might just be about the most stress inducing turn of events ever.

So one should only rebalance at like 3 PM ET on business days?
livesoft
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Re: I just rebalanced back to my AA. It gave me a little pause.

Post by livesoft »

Why is there any stress at all? I don't understand. It is not as if a 10% difference in one's asset allocation matters at all.

But I tend to only use RBDs as a rebalancing signal to buy equities. That doesn't mean I always buy on the best day to buy, but it's close enough for me.
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mystupidglasses
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Re: I just rebalanced back to my AA. It gave me a little pause.

Post by mystupidglasses »

Doc7 wrote: Tue Mar 24, 2020 11:14 am Well this might just be about the most stress inducing turn of events ever.

So one should only rebalance at like 3 PM ET on business days?
Since you're doing your rebalancing in retirement accounts, there should be no tax implications for making a further adjustment on a future day if you're not perfectly happy with today's results.
framus
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Re: I just rebalanced back to my AA. It gave me a little pause.

Post by framus »

Automagic AA rebalancing.

The current drop in equities has my portfolio down ~15%. I started the year at 60/40 Equities/Fixed as i entered retirement.

Now I'm 40/60 without touching a thing.

Miraculous!

If things continue on this path I'll achieve my goal of 30/70 by year's end. :oops:

Is this what the gospel means when we are admonished to 'Stay the Course'?
jmk
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Re: I just rebalanced back to my AA. It gave me a little pause.

Post by jmk »

framus wrote: Tue Mar 24, 2020 12:49 pm Automagic AA rebalancing.

The current drop in equities has my portfolio down ~15%. I started the year at 60/40 Equities/Fixed as i entered retirement.

Now I'm 40/60 without touching a thing.

Miraculous!

If things continue on this path I'll achieve my goal of 30/70 by year's end. :oops:

Is this what the gospel means when we are admonished to 'Stay the Course'?
More like the monsoon whoops your boat up into the air, all around, and it lands by chance right on course! All the same in the end.
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galeno
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Re: I just rebalanced back to my AA. It gave me a little pause.

Post by galeno »

Started year at 40/60. With the bear we went to 35/65.

I just over rebalanced to 45/55.

If stocks go up 11.1% we'll be at 50/50. Which is our desired AA for year's end.

And if stocks keep going down we will over rebalance to 50/50 by year's end.
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deikel
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Re: I just rebalanced back to my AA. It gave me a little pause.

Post by deikel »

In the larger scheme of things this will mean almost nothing....think about it: the market tanked (and came back up some) and you moved 35k dollars.....best case scenario the market will go up again and you make make 30% on this 'investment' - you make 10k

At the risk of loosing your job in a recession and needing money. At which point the 35k you re balanced will have dropped some more (say another 30%) and now be valued 10k less......

at your 550k total portfolio, it does not make a dent in EITHER direction (compared to the general loss you already took)

Staying the course would have been fine too.

I just had the same revelation with investing into the falling market (as per my ISP)....recovery at prior level (if and when we get there) - I will have made some money, sure, but in the larger scheme of things, it will NOT make a dent.

For me the lesson is that these one time 'opportunities' (investing or rebalancing on dips) pale in comparison to the steady saving over time....its all just noise, even in a situation like the current recession.

Granted, this will all look much worse in 2 weeks, when Q1 numbers and Q2 outlook will meet overwhelmed hospitals and exponentially growing numbers of dead - but still, its not gonna make a dent.....run the numbers, its amazing.
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Re: I just rebalanced back to my AA. It gave me a little pause.

Post by Sandtrap »

steve roy wrote: Tue Mar 24, 2020 10:18 am With enough time it'll be fine. As for me, though my AA is off its normall 30/70, I'm neither selling nor buying. (Not even looking.)
+1
Not doing anything as well.
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Triple digit golfer
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Re: I just rebalanced back to my AA. It gave me a little pause.

Post by Triple digit golfer »

deikel wrote: Tue Mar 31, 2020 12:41 pm In the larger scheme of things this will mean almost nothing....think about it: the market tanked (and came back up some) and you moved 35k dollars.....best case scenario the market will go up again and you make make 30% on this 'investment' - you make 10k

At the risk of loosing your job in a recession and needing money. At which point the 35k you re balanced will have dropped some more (say another 30%) and now be valued 10k less......

at your 550k total portfolio, it does not make a dent in EITHER direction (compared to the general loss you already took)

Staying the course would have been fine too.

I just had the same revelation with investing into the falling market (as per my ISP)....recovery at prior level (if and when we get there) - I will have made some money, sure, but in the larger scheme of things, it will NOT make a dent.

For me the lesson is that these one time 'opportunities' (investing or rebalancing on dips) pale in comparison to the steady saving over time....its all just noise, even in a situation like the current recession.

Granted, this will all look much worse in 2 weeks, when Q1 numbers and Q2 outlook will meet overwhelmed hospitals and exponentially growing numbers of dead - but still, its not gonna make a dent.....run the numbers, its amazing.
This is how I think of it too.

I initially rebalanced $32k from bonds to equities, but that took me to under 2 years in bonds/cash and I got anxiety over going below that arbitrary but important threshold for me. So I undid my transaction and put myself back "out of balance" which kept me at my 2 year level of bonds/cash. In the grand scheme, it's only 75/25 vs. 80/20. Sure, I'd love to have that $32k in equities to grow over time, but the benefit I get out of that is far less than the detriment I'd have in a job loss/recession in which I needed that money and it dropped another 50% just as I did.

Moving forward, under no circumstances will I go below 2 years in bonds/cash. It's my "Sleep Well At Night" number, given that we're a one-income family. I think of it as insurance. I hope it turns out to be a bad deal having all that money tied up in bonds/cash, because the alternative is exponentially worse.

So I agree. Steady saving over time trumps any rebalancing bonus or small changes in AA. Sometimes I forget that simple concept.
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