Rebalancing bands, what is your CURRENT out-of-balance drift?

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livesoft
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Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by livesoft » Fri Feb 12, 2016 9:22 am

It seems many people use rebalancing bands to trigger rebalancing, but I see more often than not that folks write "My rebalancing band has not been triggered yet, so I am staying the course."

So a question for folks with rebalancing bands and triggers: How far out of balance is your portfolio currently? And what number will actually cause a triggering event for you?

I'm kinda of curious if folks are getting close or are so far away that it's never gonna happen.

Thanks!

PS: I am at 71% equities right now which is overweighted in equities, so I will sell if I get to 72% equities.
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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by Doc » Fri Feb 12, 2016 9:31 am

Equities a whopping 0.54% below target.

Either my active stock picking is outstanding (not) or my bond portfolio also is tanking. :shock:

Trigger is ± 5%.
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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by Sbashore » Fri Feb 12, 2016 10:13 am

My AA is 50/50. My re-balance band is 5% overall. Currently I'm at 48.13 Equity, 51.87 Fixed. As of yesterday's close.
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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by chisey » Fri Feb 12, 2016 10:27 am

livesoft wrote:It seems many people use rebalancing bands to trigger rebalancing, but I see more often than not that folks write "My rebalancing band has not been triggered yet, so I am staying the course."

So a question for folks with rebalancing bands and triggers: How far out of balance is your portfolio currently? And what number will actually cause a triggering event for you?

I'm kinda of curious if folks are getting close or are so far away that it's never gonna happen.

Thanks!

PS: I am at 71% equities right now which is overweighted in equities, so I will sell if I get to 72% equities.


I'm a bad example since I rebalance with new money. New money, monthly, is about 0.5% of my portfolio right now so that offsets a fair amount of drift.

I'm about 1.2% high on bonds (target is 38%), 1.4% low on international stock (target is 20%), and 0.2% high on domestic stock. The closest band to being hit is emerging markets, which is at 3.4% with a bottom band of 3.0%.

All new money for February will go to international/EM.

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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by Doc » Fri Feb 12, 2016 10:30 am

chisey wrote:I'm a bad example since I rebalance with new money. New money, monthly, is about 0.5% of my portfolio right now so that offsets a fair amount of drift.

That doesn't make you a bad example. We are retired and don't make any net new contributions. But all dividends go into fixed income which accomplishes much the same thing as new contributions.
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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by retiredjg » Fri Feb 12, 2016 10:31 am

I'm right on target, perhaps because I rebalanced into stocks last week.

My bands are supposed to be 5%, but truth be told, I'm more tolerant of too much stock than not enough stock. My band is 5% when considering if I have too much stock, but probably about 2% when considering if my stock allocation is "too low".

Guess you could say I'm lopsided. :happy

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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by markcoop » Fri Feb 12, 2016 10:49 am

If there's one area I cheat my IPS, it's rebalancing bands. For some reason I can't help myself from buying on a big down day (only in my retirement accounts). So although I have embedded in my spreadsheet rules for bands (5% absolute or 25% relative), I tend to rebalance more frequently. I guess I feel there's no big negative consequence of rebalancing more frequently. In fact, it probably keeps my risk profile more constant.
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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by siamond » Fri Feb 12, 2016 11:02 am

The total absolute drift on my portfolio (across all asset categories) is around 2% this morning. But one category (bonds, of course) has a relative delta of 11%. I'm still far from my thresholds to rebalance, although I'll admit that I'm getting a little bit itchy to do it. I recently did another round of TLH though (then cursed myself for not waiting more!).

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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by whaleknives » Fri Feb 12, 2016 11:20 am

Total Stock -1.35%, Total International Stock -1.80%, Total Bond +3.14%

5%/25% bands, and I last rebalanced 1 month ago. I have 60% stocks/40% bonds with 30% international stocks, but I'm also drawing from a taxable account that only holds the stock funds, and rebalancing in a tax-deferred account.

This is interesting, but it's going to be very hard to generalize from the responses.
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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by in_reality » Fri Feb 12, 2016 11:21 am

+1.7% Fixed Income
dividends set to cash for purchase of equities

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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by RadAudit » Fri Feb 12, 2016 11:21 am

My target is 50 / 50 stocks / bonds. Retrigger bands are +/- 5%. I'm currently at -3.9% on stocks.

The portfolio is essentially a four fund portfolio.
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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by Ybsybs » Fri Feb 12, 2016 11:24 am

As of the last time I checked (January), my accounts are 0.5% out of balance. I rebalance with new contributions and check once a year in the fall after the quarterly dividend to see if it makes sense to sell and buy to rebalance. I don't do it if I'm within 1%.

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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by friar1610 » Fri Feb 12, 2016 11:32 am

My target AA is 40/55/5 although anywhere in the 40 - 45% equity range is fine. At the end of 2015 I was at about 42.5%. Yesterday I was at about 38.5%. If this downward trend continues I may balance back up to 42% or so.
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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by tetractys » Fri Feb 12, 2016 11:42 am

Funny, was just checking this out. My bond allocation has been growing, up to 27.05% this morning, a menial 2% out--not to worry. The rest of the portfolio is about the same.

In the 457(b) VINIX (S&P 500) is out quite a bit on the down side; but that's because I'm rebalancing into it with contributions. So doesn't really apply to this thread I think. -- Tet

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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by Crow Hunter » Fri Feb 12, 2016 11:52 am

I am 2% over on my bonds and I am dead on for domestic and 2% down on my international stocks. But I was right around 2% down in my bond allocation and 2% over on domestic before the first of the year.

So I haven't hit a rebalance band yet. However, I am contemplating changing my 401k purchasing to stock because I am currently purchasing bonds which are running a little on the high side.

I would like to buy more international but I prefer to buy my international in my taxable account and I don't have any "non-allocated" cash right now.

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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by Bustoff » Fri Feb 12, 2016 11:58 am

I try to maintain a rebalancing strategy consistent with Vanguards guidelines.

http://www.vanguard.com/pdf/ISGPORE.pdf

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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by packet » Fri Feb 12, 2016 12:13 pm

Target = 80/20
Current = 78/22
Balance Scheme = 5/25
Last in balance = 1/4/2016

:beerCheers,
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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by jrbdmb » Fri Feb 12, 2016 12:15 pm

I am rebalancing with a 5/10 strategy (5% of total portfolio or 10% of the target percentage for each holding). Planning to check once a month, though I have been doing it more often since the markets have been so "interesting" recently.

I am a newer Boglehead and just set this up. Allowing a smaller holding to drift 25% off of target seemed like way too much to me, which is why I went for 5/10. If I find I am rebalancing too often I may revert to the 5/25 recommended by Mr. Swedroe.

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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by chisey » Fri Feb 12, 2016 12:22 pm

jrbdmb wrote:I am a newer Boglehead and just set this up. Allowing a smaller holding to drift 25% off of target seemed like way too much to me, which is why I went for 5/10. If I find I am rebalancing too often I may revert to the 5/25 recommended by Mr. Swedroe.


It depends somewhat on the volatility of the asset class. I have a 4% target in emerging markets. If I set a band at 10% of that I'd be rebalancing all the time (a 10% drop in EM coupled with a 1% rise in the remaining portfolio is all it would take-- that could happen in as little as a couple of days with EM, and reverse just as quickly).

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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by Rodc » Fri Feb 12, 2016 1:11 pm

1.5%

But I did rebalance a several days ago when it was about 5%
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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by tyler_cracker » Fri Feb 12, 2016 1:47 pm

i don't generally like these "post a meaningless number from your portfolio" threads[1] but since i was just looking at this and since i <3 livesoft:

fixed income: +4.5%
us equities: -1.5%
intl equities: -3%

i've always rebalanced with new money, but since i am currently taking some time off work i'm forced to play decumulator. i'll rebalance once one of these numbers goes +/- 5%.


[1] what is your annualized return? what is your ytd return? what is your dividend rate? what is your bond allocation? what is your allocation to corporate debt? what is the airspeed velocity of an unladen swallow?

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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by livesoft » Fri Feb 12, 2016 2:03 pm

I expected responses all over the place. I assumed that many people would be well inside any rebalancing bands that they had set up.

After all, a 5% rebalancing trigger requires a pretty substantial movement in market prices for typical asset allocations. Plus since folks are either contributing or withdrawing from their portfolios in rebalance-aware ways, I assume that folks do this to help maintain their asset allocation.

That is, I think chisey is a perfect example of all this and quite the contrary to their statement about "bad example." :)

I actually secretly believe the 5/25 rebalancing bands are Larry Swedroe's trick to make people not have to rebalance at all while thinking they are actually using one of his secret sauce methods. :twisted:
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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by chisey » Fri Feb 12, 2016 2:45 pm

livesoft wrote:That is, I think chisey is a perfect example of all this and quite the contrary to their statement about "bad example." :)


:happy

I think my situation is typical but just didn't think that's what you were after. Happy to be wrong. I have hit 5/25 bands before and I imagine that as the new money gets smaller relative to the portfolio value, I'll be more likely to hit them in the future. But I expect it to still be a rare event.

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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by Rodc » Fri Feb 12, 2016 3:16 pm

livesoft wrote:I expected responses all over the place. I assumed that many people would be well inside any rebalancing bands that they had set up.

After all, a 5% rebalancing trigger requires a pretty substantial movement in market prices for typical asset allocations. Plus since folks are either contributing or withdrawing from their portfolios in rebalance-aware ways, I assume that folks do this to help maintain their asset allocation.

That is, I think chisey is a perfect example of all this and quite the contrary to their statement about "bad example." :)

I actually secretly believe the 5/25 rebalancing bands are Larry Swedroe's trick to make people not have to rebalance at all while thinking they are actually using one of his secret sauce methods. :twisted:


:)

Only reason I hit the 5% band is I have a couple of funds with a modest cost to purchase so I don't put new money into them even if low, so after a while they drift low enough to trigger a buy independent of the markets. Otherwise for the other funds it really takes a 2001 or 2008 type event.
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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by Aptenodytes » Fri Feb 12, 2016 3:20 pm

On the stock/bond split I'm right at my target (within a tenth of a percentage point).

Some of my slices are off by a max of 3.3% of the slice, which is a tiny % of the portfolio.

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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by rmelvey » Fri Feb 12, 2016 3:27 pm

If i can rebalance with no tax consequences I do it whenever I log in to my 401k account which is probably once a month. For taxable accounts I do it with new contributions or withdrawals only.

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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by furwut » Fri Feb 12, 2016 3:38 pm

60/40 AA. Equities are currently at 56.8%. I use a 5% band so I haven't rebalanced. I am retired and will shortly withdraw some from bonds for this years spending needs.

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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by jebmke » Fri Feb 12, 2016 3:42 pm

I am 2 points above my trigger point as of yesterday. This likely means that my monthly draw will come from bonds instead of equity. Some will come out of equity in March since dividends are distributed. Will still take some significant movement to cause an exchange other than for monthly cash needs.
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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by Crow Hunter » Fri Feb 12, 2016 5:00 pm

tyler_cracker wrote:i don't generally like these "post a meaningless number from your portfolio" threads[1] but since i was just looking at this and since i <3 livesoft:

fixed income: +4.5%
us equities: -1.5%
intl equities: -3%

i've always rebalanced with new money, but since i am currently taking some time off work i'm forced to play decumulator. i'll rebalance once one of these numbers goes +/- 5%.


[1] what is your annualized return? what is your ytd return? what is your dividend rate? what is your bond allocation? what is your allocation to corporate debt? what is the airspeed velocity of an unladen swallow?


African or European?

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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by jebmke » Fri Feb 12, 2016 5:04 pm

Tree, Barn, Cliff, Bank, Rough-wing?
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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by Peter Foley » Fri Feb 12, 2016 5:06 pm

I was 3% over in equities on December 31, 2015. Since I use a 5% band I was within range and have not done anything. The 2016 market has probably moved the needle to a couple percentage points high in bonds. When you are at 50/50 and no longer contributing, it takes a lot of market movement to breech a 5% band.

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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by tyler_cracker » Fri Feb 12, 2016 7:46 pm

Crow Hunter wrote:African or European?


i don't know that!

jebmke wrote:Tree, Barn, Cliff, Bank, Rough-wing?


found the bird nerd :D

(sorry livesoft)

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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by livesoft » Fri Feb 12, 2016 7:56 pm

No apologies needed. I certainly get all the swallow references. :)
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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by TXJuice » Fri Feb 12, 2016 8:05 pm

I decided to follow the 5/25. If my AA for the specific fund is <20% it is a 25% change (ex: I want 10% bonds and it goes above 12.5% or below 7.5%) or for the funds >20% of my AA if there is a >5% change (ex: I want 40% in US and it goes to >45% or <35%).

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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by KlangFool » Fri Feb 12, 2016 8:18 pm

64/36

5/25 rebalancing band.

International stock down by 11%

Bond up by 14%

Nothing trigger the rebalancing band yet. I no longer invest in REIT index fund. So, over the last 10 years, it was triggered only once. And, it was by REIT index fund.

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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by Phineas J. Whoopee » Fri Feb 12, 2016 8:20 pm

Currently, without shouting, I dunno. I have a look periodically. I'll probably calculate it all out tomorrow for you, if your curiosity can wait until then.

I see that as of close of trade last Friday, the 5th, my stocks were down from target by less than 1%. The recent interesting times brought them back from being near the upper 10%-of-portfolio-wide band limit.

Why? Will the information cause you to make different decisions for your own portfolio than you might have made without it?

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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by grabiner » Fri Feb 12, 2016 11:40 pm

I do an annual rebalance in January, so I am still on target. But I wouldn't be far from the target anyway, because my target is 4% net bonds (bond allocation minus mortgage); even if the stock market lost half its value, the 4% would only become 8%.

And the "net" is important. If the stock market continues to decline, I will be able to sell enough stock to pay off my entire mortgage without any capital gains. If I choose to do that (which I might do, depending on interest rates), I will move an equal amount from bonds to stock in my employer plan to keep the same stock exposure, so this won't be a rebalance.
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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by Clive » Sat Feb 13, 2016 7:14 am

If the prior trend continues after rebalancing then it would have been better to have delayed rebalancing. If the prior trend reverses after rebalancing you rebalanced near/at the optimal point. With hindsight a optimal rebalance point can be identified, but that cannot be predicted in advance.

Compare two investors each initially buying equal amounts of three assets where one rebalances yearly back to three equal thirds and the other just bought-and-held. Generally both will broadly achieve similar rewards. Over the total period (years) the buy and holder will likely have seen one asset more heavily weighted than another, the rebalancer will have seen more similar (balanced) weightings in each of the three assets. Buy and holder held on average a higher weighting in the better performing and less weighting to the worst asset; Rebalancer made up the lack of lower weighting in the better asset/higher exposure to the worst asset through 'trading gains' (rebalancing/volatility capture).
How far out of balance is your portfolio currently? And what number will actually cause a triggering event for you?

Never out of balance because I don't have specific numbers. Prediction of change of current trend is my trigger to review/change i.e. I delay until it appears that the peak (trough) has past (miss the optimum, but potentially close if that change of trend is subsequently sustained). Often that will subsequently prove to have been a false bottom (top) reversal. Sometimes it will be right. Have a look at Robert Lichello's AIM with Ocroft extension. Monitor (paper trade) AIM trades and when a sequence of buying (selling) stops, then make the accumulated AIM (paper) trades in a single large actual trade.

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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by JCE66 » Sat Feb 13, 2016 7:31 am

livesoft....Just calculated my portfolio drift this morning, the sum of positive variances is 2.2%. The previous rebalance (my first ever...woo hoo!) was done on 1/27/2016 when the sum of the positive variances was 3.6%.

That study you posted showed a clear advantage to those who check drift weekly and rebalance promptly when drift is between 3% and 4% (if your equity allocation is ~80%). There was a lively discussion on how big that advantage actually is (siamond had some things to say - I read those comments with great interest) - but there is still an advantage, however small. For somebody like me who is woefully behind on retirement savings, I need every advantage I can get.

With all of this said, I am doing whatever I can to add money to my Roth and both 401Ks (I have two jobs, one FT and one PT). The Roth gets weekly money (will max it out for this year). I just stay the course and keep on keeping on....

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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by livesoft » Sat Feb 13, 2016 8:43 am

Phineas J. Whoopee wrote:Why? Will the information cause you to make different decisions for your own portfolio than you might have made without it?

Oh, this is easy to answer. It is all part of marketing outreach to Bogleheads on the forum.

It is pretty clear that when someone reading the forum sees the same advertisements threads over and over and over such as on tax-loss harvesting (TLH) that only then do they look into the method and decide if it is right for them.

In the same way, Rebalancing appears to not be a method used by many people who read the forum. And those that do may not use any rebalancing bands or even calculate a so-called drift. So it takes multiple threads with "rebalancing" in their titles to give people a nudge.

This thread is a nudge to make people go take a look.
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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by Phineas J. Whoopee » Sat Feb 13, 2016 11:15 am

livesoft wrote:
Phineas J. Whoopee wrote:Why? Will the information cause you to make different decisions for your own portfolio than you might have made without it?

...
This thread is a nudge to make people go take a look.

Fair enough.

As I promised to tell you, as of close of trade yesterday my stock allocation is 1.2% of portfolio below target.

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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by magneto » Sat Feb 13, 2016 11:52 am

As a valuation based (ultra-passive/cautious) Dynamic Asset Allocator, and being in retirement :-

Stock Target 36.63% (normal expected range 25% - 50%)
Present Stock position 29.33% (in spite of recent progressive buying).
Current out of balance 7.3%.

Planned Action : To continue to buy at the rate of 10% of deviation per month.

Just don't ask which way the market is heading :!:
But am loving the opportunity to pick up stocks at reduced prices. Long may it last. :!:

Clueless as ever.
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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by Doc » Sat Feb 13, 2016 12:20 pm

magneto wrote:Planned Action : To continue to buy at the rate of 10% of deviation per mon


That's interesting. So if you are out of balance by 5% you buy/sell 0.5%? Do I have that right? Then if the market doesn't move you get back in balance in ten months. (Based on a linear purchase. If you take a 1/10 step every month you never actually get there.)

(Aside. A scientist is put in a room with a pretty girl and told he can half the distance between them every minute. When he reaches her he gets a kiss. After 10 minutes the scientist gives up because he can never get there. An engineer in the same situation kisses the girl after five minutes. The distance is "close enough".)
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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by retiredjg » Sat Feb 13, 2016 12:32 pm

Doc wrote: After 10 minutes the scientist gives up because he can never get there. An engineer in the same situation kisses the girl after five minutes. The distance is "close enough".

Tee hee…. :D

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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by itstoomuch » Sat Feb 13, 2016 12:34 pm

Normally near 100% invested.
Currently, about 5% in cash of total retirement assets (home not included); or About 35% of discretionary is cash.
We are transitioning from living off of SS+ pension, to taking new Income from retirement buckets. I imagine this scenario will last 3-5 years as we move through RMD and readjust our spending habits and priorities. I also sold some equity 12Feb on a stock popup.

Also mildly bearish and 2016 I will be working towards cash in discretionary accounts.
:sharebeer
Last edited by itstoomuch on Sat Feb 13, 2016 12:49 pm, edited 3 times in total.
Rev90517; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax 25%. Early SS. FundRatio (FR) >1.1 67/70yo

magneto
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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by magneto » Sat Feb 13, 2016 12:41 pm

Doc wrote:
magneto wrote:Planned Action : To continue to buy at the rate of 10% of deviation per mon


That's interesting. So if you are out of balance by 5% you buy/sell 0.5%? Do I have that right? Then if the market doesn't move you get back in balance in ten months. (Based on a linear purchase. If you take a 1/10 step every month you never actually get there.)

(Aside. A scientist is put in a room with a pretty girl and told he can half the distance between them every minute. When he reaches her he gets a kiss. After 10 minutes the scientist gives up because he can never get there. An engineer in the same situation kisses the girl after five minutes. The distance is "close enough".)


Yep that's it.
The pretty girl (aka the market) will come to meet you. :wink:
'There is a tide in the affairs of men ...', Brutus (Market Timer)

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midareff
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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by midareff » Sat Feb 13, 2016 12:45 pm

Age 68 and 4 years retired. Allocation is 40% equities 60% bonds and bank cash, CD's, etc. Last re-balanced mid November when the S&P poked it's head over 2100 and I dialed down equities raising bonds about 8%. All dividends from taxable go to the bank to add to pension and SS. WR as of yesterday is 3.97%. Equities are presently .65% under target. Bands for AA are 5%, individual holdings about 15%. Will revisit AA again in two years for my 70th.

As a side note.... I draw monthly from bonds taxable as well as dividends from equities parked there. At this point in my life cycle I would consider my re-balancing to be primarily asymmetrical, equities to bonds. It's a whole need, willingness and ability to take risk thing + if you have won the game, why keep playing.
Last edited by midareff on Sat Feb 13, 2016 1:05 pm, edited 1 time in total.

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vitaflo
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Re: Rebalancing bands, what is your CURRENT out-of-balance drift?

Post by vitaflo » Sat Feb 13, 2016 1:04 pm

Current drift is 1.97%. I trigger a rebalance at 3.5%. This happens rarely because of new money placement.

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