who’s rebalancing into Fixed income?

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Topic Author
Streptococcus
Posts: 377
Joined: Thu Jan 03, 2013 12:17 am

who’s rebalancing into Fixed income?

Post by Streptococcus » Fri Apr 10, 2020 2:59 pm

First time recession and there is a lot of learning going on for me:

Lesson1: I confirmed that having a relatively large portfolio, I do not need a separate E-fund to sleep well at night as I can just sell my bonds and use them as E-fund. Having 5 years of living expenses in Bonds help relieve anxiety.

Lesson 2: A recession is never like a plane crash, more like peaks and valleys on the way down. And if you have a week like last week (a little peak) that allows you to rebalance into bonds, do it. I just bought 40K worth of Fixed Income to realign with my AA. To me, that amount is significant because it represents about 60% of my living expenses.

This is great for a simple reason: if the market tanks an additional 30% over the next few weeks or months I will feel more comfortable as I took advantage of the opportunistic rebalancing during the crash. It’s like gaining some new life during a plane crash.

I don’t know if this opportunistic rebalancing yields a better long term return. I’m too lazy to do any simulation. The only thing that matters to me is that it is a great psychological boost.

Please comment if you disagree (or agree) :D

livesoft
Posts: 72114
Joined: Thu Mar 01, 2007 8:00 pm

Re: who’s rebalancing into Fixed income?

Post by livesoft » Fri Apr 10, 2020 3:07 pm

I rebalanced a couple weeks ago into fixed income by selling half my TIAA Real Estate and buying a bond fund. The TREA had not dropped like equities had, so it felt psychologically good when the bond fund went up 4% after I bought it.
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sarabayo
Posts: 404
Joined: Fri Jun 29, 2018 6:59 pm

Re: who’s rebalancing into Fixed income?

Post by sarabayo » Fri Apr 10, 2020 3:17 pm

Streptococcus wrote:
Fri Apr 10, 2020 2:59 pm
First time recession and there is a lot of learning going on for me:

Lesson1: I confirmed that having a relatively large portfolio, I do not need a separate E-fund to sleep well at night as I can just sell my bonds and use them as E-fund. Having 5 years of living expenses in Bonds help relieve anxiety.

Lesson 2: A recession is never like a plane crash, more like peaks and valleys on the way down. And if you have a week like last week (a little peak) that allows you to rebalance into bonds, do it. I just bought 40K worth of Fixed Income to realign with my AA. To me, that amount is significant because it represents about 60% of my living expenses.

This is great for a simple reason: if the market tanks an additional 30% over the next few weeks or months I will feel more comfortable as I took advantage of the opportunistic rebalancing during the crash. It’s like gaining some new life during a plane crash.

I don’t know if this opportunistic rebalancing yields a better long term return. I’m too lazy to do any simulation. The only thing that matters to me is that it is a great psychological boost.

Please comment if you disagree (or agree) :D
It seems from your post that you are not changing your AA, but if you were able to rebalance into fixed income just now, that means your equity holdings must have been overweight, even after the recent plunge in equities over the last couple months. Doesn't that mean your portfolio was way off-balance compared to your AA? That doesn't sound like a situation that most people would be in, so the question is moot, unless you're considering that people are changing their AAs in response to market conditions.

Topic Author
Streptococcus
Posts: 377
Joined: Thu Jan 03, 2013 12:17 am

Re: who’s rebalancing into Fixed income?

Post by Streptococcus » Fri Apr 10, 2020 3:30 pm

sarabayo wrote:
Fri Apr 10, 2020 3:17 pm
Streptococcus wrote:
Fri Apr 10, 2020 2:59 pm
First time recession and there is a lot of learning going on for me:

Lesson1: I confirmed that having a relatively large portfolio, I do not need a separate E-fund to sleep well at night as I can just sell my bonds and use them as E-fund. Having 5 years of living expenses in Bonds help relieve anxiety.

Lesson 2: A recession is never like a plane crash, more like peaks and valleys on the way down. And if you have a week like last week (a little peak) that allows you to rebalance into bonds, do it. I just bought 40K worth of Fixed Income to realign with my AA. To me, that amount is significant because it represents about 60% of my living expenses.

This is great for a simple reason: if the market tanks an additional 30% over the next few weeks or months I will feel more comfortable as I took advantage of the opportunistic rebalancing during the crash. It’s like gaining some new life during a plane crash.

I don’t know if this opportunistic rebalancing yields a better long term return. I’m too lazy to do any simulation. The only thing that matters to me is that it is a great psychological boost.

Please comment if you disagree (or agree) :D
It seems from your post that you are not changing your AA, but if you were able to rebalance into fixed income just now, that means your equity holdings must have been overweight, even after the recent plunge in equities over the last couple months. Doesn't that mean your portfolio was way off-balance compared to your AA? That doesn't sound like a situation that most people would be in, so the question is moot, unless you're considering that people are changing their AAs in response to market conditions.
Not really. I actually rebalanced near the recent bottom 2 or 3 weeks ago, sold a lot of bonds and increased my stocks allocation as directed by my IPS. My AA is 5% more stocks heavy than it was in december 2019.

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sarabayo
Posts: 404
Joined: Fri Jun 29, 2018 6:59 pm

Re: who’s rebalancing into Fixed income?

Post by sarabayo » Fri Apr 10, 2020 3:32 pm

Streptococcus wrote:
Fri Apr 10, 2020 3:30 pm
sarabayo wrote:
Fri Apr 10, 2020 3:17 pm
Streptococcus wrote:
Fri Apr 10, 2020 2:59 pm
First time recession and there is a lot of learning going on for me:

Lesson1: I confirmed that having a relatively large portfolio, I do not need a separate E-fund to sleep well at night as I can just sell my bonds and use them as E-fund. Having 5 years of living expenses in Bonds help relieve anxiety.

Lesson 2: A recession is never like a plane crash, more like peaks and valleys on the way down. And if you have a week like last week (a little peak) that allows you to rebalance into bonds, do it. I just bought 40K worth of Fixed Income to realign with my AA. To me, that amount is significant because it represents about 60% of my living expenses.

This is great for a simple reason: if the market tanks an additional 30% over the next few weeks or months I will feel more comfortable as I took advantage of the opportunistic rebalancing during the crash. It’s like gaining some new life during a plane crash.

I don’t know if this opportunistic rebalancing yields a better long term return. I’m too lazy to do any simulation. The only thing that matters to me is that it is a great psychological boost.

Please comment if you disagree (or agree) :D
It seems from your post that you are not changing your AA, but if you were able to rebalance into fixed income just now, that means your equity holdings must have been overweight, even after the recent plunge in equities over the last couple months. Doesn't that mean your portfolio was way off-balance compared to your AA? That doesn't sound like a situation that most people would be in, so the question is moot, unless you're considering that people are changing their AAs in response to market conditions.
Not really. I actually rebalanced near the recent bottom 2 or 3 weeks ago, sold a lot of bonds and increased my stocks allocation as directed by my IPS. My AA is 5% more stocks heavy than it was in december 2019.
Oh, I see. Then you rebalance a lot more often than I do :) I rebalance quarterly at most, annually at least (directed by the 5-25 rule).

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steve roy
Posts: 1774
Joined: Thu May 13, 2010 5:16 pm

Re: who’s rebalancing into Fixed income?

Post by steve roy » Fri Apr 10, 2020 3:33 pm

Rebalancing into fixed has been done for us. Our usual 30/70 is now 26/74. Magic of the market place!

Topic Author
Streptococcus
Posts: 377
Joined: Thu Jan 03, 2013 12:17 am

Re: who’s rebalancing into Fixed income?

Post by Streptococcus » Fri Apr 10, 2020 3:40 pm

sarabayo wrote:
Fri Apr 10, 2020 3:32 pm
Streptococcus wrote:
Fri Apr 10, 2020 3:30 pm
sarabayo wrote:
Fri Apr 10, 2020 3:17 pm
Streptococcus wrote:
Fri Apr 10, 2020 2:59 pm
First time recession and there is a lot of learning going on for me:

Lesson1: I confirmed that having a relatively large portfolio, I do not need a separate E-fund to sleep well at night as I can just sell my bonds and use them as E-fund. Having 5 years of living expenses in Bonds help relieve anxiety.

Lesson 2: A recession is never like a plane crash, more like peaks and valleys on the way down. And if you have a week like last week (a little peak) that allows you to rebalance into bonds, do it. I just bought 40K worth of Fixed Income to realign with my AA. To me, that amount is significant because it represents about 60% of my living expenses.

This is great for a simple reason: if the market tanks an additional 30% over the next few weeks or months I will feel more comfortable as I took advantage of the opportunistic rebalancing during the crash. It’s like gaining some new life during a plane crash.

I don’t know if this opportunistic rebalancing yields a better long term return. I’m too lazy to do any simulation. The only thing that matters to me is that it is a great psychological boost.

Please comment if you disagree (or agree) :D
It seems from your post that you are not changing your AA, but if you were able to rebalance into fixed income just now, that means your equity holdings must have been overweight, even after the recent plunge in equities over the last couple months. Doesn't that mean your portfolio was way off-balance compared to your AA? That doesn't sound like a situation that most people would be in, so the question is moot, unless you're considering that people are changing their AAs in response to market conditions.
Not really. I actually rebalanced near the recent bottom 2 or 3 weeks ago, sold a lot of bonds and increased my stocks allocation as directed by my IPS. My AA is 5% more stocks heavy than it was in december 2019.
Oh, I see. Then you rebalance a lot more often than I do :) I rebalance quarterly at most, annually at least (directed by the 5-25 rule).
In normal times, I do the same as you. I usually never look at my portfolio. Recently, I have found myself rebalancing about once a month, or more frequently if there is a RBD. If we have a back to back -10% or + 10% next week, I’ll see if there is a rebalancing opportunity. Also, today was the only time I rebalanced into Bonds without hitting my 5/25 band. I just felt too good buying 40K worth of Fixed income and still being within my AA.

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