Is accelerating an equities glide path a market timing strategy?

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fingineer
Posts: 12
Joined: Wed Mar 08, 2017 7:14 pm

Is accelerating an equities glide path a market timing strategy?

Post by fingineer » Mon Jun 19, 2017 1:08 pm

We are pursuing early retirement this year. I've read a lot (here and elsewhere) about asset allocation strategies, and we've decided to pursue a rising glide path approach to mitigate sequence of returns risk.
https://www.kitces.com/blog/should-equi ... ly-better/

My question is whether it is a market timing strategy (and a bad idea) to accelerate an equities glide path by increasing the equities percentage after a market correction. The strategy is design to buy insurance against getting poor returns in the first few years of retirement, since in the end it will all work out. But if you do get that correction, you have "used your insurance" and would it be reasonable to increase equities exposure closer to the desired final value? This is essentially betting that there won't be a second big correction, and you can then buy equities on sale. I'm imagining for example "if the market drops 10%, I will accelerate my equities glide by say 10%. If it drops another 10% next year, I would shift another 10% into equities." I would not move more into equities than my desired final long term allocation.

I guess I feel like this IS market timing, but I'm also not seeing how it's a bad idea. So, I must be missing something! What do you think?

MIpreRetirey
Posts: 617
Joined: Fri Sep 06, 2013 12:35 pm

Re: Is accelerating an equities glide path a market timing strategy?

Post by MIpreRetirey » Mon Jun 19, 2017 4:15 pm

Just to contrast your proposal. What if, instead, you decided on the actual future glide path of AA as a discrete AA for each year in the future?
Like at age 60 (or 5 yrs. b4 retirement, or some such) you are 35/65, age 65 you are 40/60, age 70 you are 45/55, age 75 you are 50/50, etc.
Then rebalance to these AA as stocks decline and gain.

Wouldn't this way be like resetting the insurance amount by just rebalancing to the 'true'(pre-planned) glide path? --And the rising glide path is because the insurance is less and less needed up until you are age 70+, or so?

Because, though you've collected on your insurance in a downturn, you still need some (declining amount by risk) insurance until ,say, age 70?

Thinking of this reduced AA as an insurance, and using some 'made for everyone' plan, I think it could be more personalized as functions of your own funding amount and years remaining in retirement plus bequest plans/goals.

You can also consider your portfolio as needing to be a relatively secure income stream throughout as a minimum bar to achieve.

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