Do any of you not rebalance?

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Triple digit golfer
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Do any of you not rebalance?

Post by Triple digit golfer » Thu Mar 26, 2020 10:26 am

Hey Bogleheads,

Do we have any among us who do not rebalance their portfolios? If this is you, do you always contribute per your AA?

Maybe your desired AA is 70/30 and the market takes it up to 76/24 over a period of time. Do you always put new money in at 70/30 and essentially ignore the AA of the current portfolio?

Do you feel that you're missing out on any potential "buy low" times that rebalancing may offer, or are you content with new money to buy low?

MarkRoulo
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Re: Do any of you not rebalance?

Post by MarkRoulo » Thu Mar 26, 2020 6:41 pm

Triple digit golfer wrote:
Thu Mar 26, 2020 10:26 am
Do we have any among us who do not rebalance their portfolios? If this is you, do you always contribute per your AA?

Maybe your desired AA is 70/30 and the market takes it up to 76/24 over a period of time. Do you always put new money in at 70/30 and essentially ignore the AA of the current portfolio?

Do you feel that you're missing out on any potential "buy low" times that rebalancing may offer, or are you content with new money to buy low?
I don't re-balance. But I'm only "sorta" a Boglehead. Or maybe less than that. Though I pretty much only own index funds and rarely sell ...

I don't feel that I'm "missing out." The basic idea behind index investing is that the market price is the best guess for the true price. This isn't a claim that the market price is ALWAYS correct, just that it is very difficult to do better. So ... if the best guess is that the companies in the S&P500 are worth 75% what they were a few months ago, then buying them today is no better (or worse) a proposition than buying them a few months ago because they are actually worth less [NOTE: This isn't the same thing as being able to choose in mid-March if I'd like to invest at early January prices or mid-March prices]

But don't conflate re-balancing with "buying low." Re-balancing is similar to selling covered call options. You benefit if/when stock prices are wandering around a given price. You lose (relative to buy-hold-don't-rebalance) when stocks are trending in either direction. You aren't getting a bonus. You are taking on tail risk in exchange for better returns under some fairly common circumstances.

UpperNwGuy
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Re: Do any of you not rebalance?

Post by UpperNwGuy » Thu Mar 26, 2020 6:54 pm

I rarely rebalance my 60/40 portfolio. When I add funds each month, I always add them to the whichever side is low. I think there was one stretch in 2019 when I only added to bonds for about eight months in a row. Even so, the stock side of my portfolio kept growing, and it was almost at 65/35 at the start of 2020. In January I rebalanced it down to 62/38. During the current market decline, my actual allocation has bounced between 56/44 and 54/46. I wasn't willing to rebalance until it got below 55/45 and stayed there for a full week. That didn't happen, and I'm now back at 57/43 without doing any rebalancing. Since we all own the same market indices, I'm frankly surprised to see so many posts about rebalancing.

kelvan80
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Re: Do any of you not rebalance?

Post by kelvan80 » Thu Mar 26, 2020 7:04 pm

My rebalance went through two days ago. We are 70/30 and were off about 10%. We usually rebalance with new funds, but this time we were out of whack by about $20k. It may have to happen again but I probably won't look unless it falls again another 10 or 20%.

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Re: Do any of you not rebalance?

Post by Shackleton » Thu Mar 26, 2020 7:10 pm

I’ve never rebalanced. I have adjusted my contributions slightly from 90/10 to 80/20 over the years. Since I’m now in my 50’s that seemed like a good idea. What can I say, as I get older I am not such a risk taker! :D <sarcasm for those that don’t get it. I know 80/20 is still plenty risky for most 50-somethings>
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Re: Do any of you not rebalance?

Post by Clever_Username » Thu Mar 26, 2020 7:29 pm

Yeah, sort of lately. I was in balance at end of December, and I just haven't been checking since, and I would bet there's a good chance I have crossed a re-balance band since then!

What complicates it is that I have a really interesting mix. The fraction of my portfolio that I want in bonds is equal to my taxable account (inc. Series I Bonds). So it's now hard to re-balance since no account with tax advantage has a mix, and all of tax advantaged at the moment is my under-weight asset (stocks).

The good news is that I'm going to be contributing a lot to tax advantaged in the coming months, so I'm likely to eventually need to buy bonds in tax advantaged. In the meantime, if this is a new bottom, I guess I missed a minor buying opportunity, but I'm not rich enough to fret about it. And if it were a significant amount of money, I'd be saying that at least I have that money, nothing to fret about.
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Re: Do any of you not rebalance?

Post by birdog » Thu Mar 26, 2020 7:41 pm

A flight instructor once told me “Fly the plane, don’t let the plane fly you.” Meaning, put the plane where you want it, don’t let airspeed, altitude and heading all wander a bit because the plane nosed up a bit here and yawed right a bit there. I try to manage my portfolio the same way. I talked to a retired family member in early Feb who told me he wanted his AA to be 65-35 but the lengthy bull market pushed him up to 80-20. I told him he should rebalance. He said that if the market starts to drop he’ll sell some stocks then. I spoke to him again when we were 30% down and I asked him if he did as he said. He said, no, that it happened so fast and he just didn’t see it coming. He asked me if I saw it coming. I said, no, that’s the point. You don’t see it coming. That’s why you pick an AA that you can accept in a bear market and when it gets out of balance, you rebalance it.

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Re: Do any of you not rebalance?

Post by BrownEyedGirl_27 » Thu Mar 26, 2020 7:47 pm

Since our AA is now 98% stocks and 2% bonds (across all of our accounts) I do not worry about rebalancing anymore. We changed our allocation last year and then decided to not worry about REITs or bonds at all. The only reason we have bonds is that my husband has a Vanguard LifeStrategy fund with a tiny amount of bonds in it.

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Triple digit golfer
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Re: Do any of you not rebalance?

Post by Triple digit golfer » Thu Mar 26, 2020 7:51 pm

birdog wrote:
Thu Mar 26, 2020 7:41 pm
A flight instructor once told me “Fly the plane, don’t let the plane fly you.” Meaning, put the plane where you want it, don’t let airspeed, altitude and heading all wander a bit because the plane nosed up a bit here and yawed right a bit there. I try to manage my portfolio the same way. I talked to a retired family member in early Feb who told me he wanted his AA to be 65-35 but the lengthy bull market pushed him up to 80-20. I told him he should rebalance. He said that if the market starts to drop he’ll sell some stocks then. I spoke to him again when we were 30% down and I asked him if he did as he said. He said, no, that it happened so fast and he just didn’t see it coming. He asked me if I saw it coming. I said, no, that’s the point. You don’t see it coming. That’s why you pick an AA that you can accept in a bear market and when it gets out of balance, you rebalance it.
This is great perspective.

Thanks for the replies, everybody.

Bama12
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Re: Do any of you not rebalance?

Post by Bama12 » Thu Mar 26, 2020 8:09 pm

I don't re-balance

spm301
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Re: Do any of you not rebalance?

Post by spm301 » Thu Mar 26, 2020 8:12 pm

I never re-balance, but its probably due to ignorance/stupidity. I figure if keep investing at my AA everything will balance out in the end.

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Re: Do any of you not rebalance?

Post by flaccidsteele » Thu Mar 26, 2020 8:12 pm

I market time by buying more during bear markets

Some people call it rebalancing 🤷‍♂️

Whatever
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat

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Triple digit golfer
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Re: Do any of you not rebalance?

Post by Triple digit golfer » Thu Mar 26, 2020 8:17 pm

Bama12 wrote:
Thu Mar 26, 2020 8:09 pm
I don't re-balance
So how do you contribute?

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Triple digit golfer
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Re: Do any of you not rebalance?

Post by Triple digit golfer » Thu Mar 26, 2020 8:18 pm

spm301 wrote:
Thu Mar 26, 2020 8:12 pm
I never re-balance, but its probably due to ignorance/stupidity. I figure if keep investing at my AA everything will balance out in the end.
That's what I was wondering. Time to go to portfolio visualizer and tinker!

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Re: Do any of you not rebalance?

Post by Unladen_Swallow » Thu Mar 26, 2020 8:30 pm

Triple digit golfer wrote:
Thu Mar 26, 2020 10:26 am
Hey Bogleheads,

Do we have any among us who do not rebalance their portfolios? If this is you, do you always contribute per your AA?

Maybe your desired AA is 70/30 and the market takes it up to 76/24 over a period of time. Do you always put new money in at 70/30 and essentially ignore the AA of the current portfolio?

Do you feel that you're missing out on any potential "buy low" times that rebalancing may offer, or are you content with new money to buy low?
We don't rebalance. I am 100% stocks, and have been so even before this mess (my spouse is in a Target retirement that is about 90% stocks). We let it be.

We don't have loose power around, unless it is a bonus or the regular monthly contributions. No regrets here. History has shown that any bonus always comes through when stocks are rallying, never when they are down. Oh well.
"I think it's much more interesting to live not knowing than to have answers which might be wrong." - Richard Feynman

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Re: Do any of you not rebalance?

Post by LiterallyIronic » Thu Mar 26, 2020 8:48 pm

Triple digit golfer wrote:
Thu Mar 26, 2020 10:26 am
Hey Bogleheads,

Do we have any among us who do not rebalance their portfolios? If this is you, do you always contribute per your AA?

Maybe your desired AA is 70/30 and the market takes it up to 76/24 over a period of time. Do you always put new money in at 70/30 and essentially ignore the AA of the current portfolio?

Do you feel that you're missing out on any potential "buy low" times that rebalancing may offer, or are you content with new money to buy low?
I have never rebalanced. I don't even know how. My 401k is set to have 100% of the contributions to go into "Large Cap Stock Index Fund" or whatever it's called. So it's 100/0. My Roth IRA has always been in a Target Retirement Fund that is way out in the future, at 90/10. Presumably it balances itself to stay at 90/10. New money always goes into them and old money never moves around.

I don't think I miss any "buy low" opportunities because I buy four times per month - two paychecks and two Roth IRA contributions, which should even out in catching highs and lows. Whatever. I keep it simple.

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Re: Do any of you not rebalance?

Post by Bluce » Thu Mar 26, 2020 8:56 pm

I didn't re-balance in 2008, and haven't since either because for the past 8-10 years I've gradually shifted my AA from 65/35 to 30/70.

I just checked it tonight for the first time in a couple weeks and it's 27/73. I probably won't do anything with it, and any SEP contributions don't move the needle anyway.
"There are no new ideas, only forgotten ones." -- Amity Shlaes

anhonymous
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Re: Do any of you not rebalance?

Post by anhonymous » Thu Mar 26, 2020 9:22 pm

I “invest” to an AA but do not “rebalance” the outcomes. So every dime I invest follows my AA but I don’t react to whatever happens after that.

Btw OP thanks for posing this question. I have been wondering the same every time there was a rebalancing question on this forum

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Ramjet
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Re: Do any of you not rebalance?

Post by Ramjet » Thu Mar 26, 2020 9:36 pm

100% stocks @ 80% U.S./20% INT. Been thinking of maintaining this contribution rate but maybe not rebalancing going forward. Note that if I owned bonds I would indeed rebalance to keep what equity/bond ratio I wanted.

Ferdinand2014
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Re: Do any of you not rebalance?

Post by Ferdinand2014 » Thu Mar 26, 2020 9:45 pm

Triple digit golfer wrote:
Thu Mar 26, 2020 10:26 am
Hey Bogleheads,

Do we have any among us who do not rebalance their portfolios? If this is you, do you always contribute per your AA?

Maybe your desired AA is 70/30 and the market takes it up to 76/24 over a period of time. Do you always put new money in at 70/30 and essentially ignore the AA of the current portfolio?

Do you feel that you're missing out on any potential "buy low" times that rebalancing may offer, or are you content with new money to buy low?
I do not rebalance. I put 100% of new money into FXAIX (Fidelity 500 index fund). No, I do not feel I am missing out on anything. My plan as outlined, eliminates my human behavior because there are zero decisions to me made and it is all automatic.

I do not have an allocation ratio. I keep enough cash ‘to sleep well’ with everything else going into a low cost S&P 500 index fund every Friday without fail automatically. It does not matter if my ‘sleep well’ number is 5% or 50% of my portfolio. It does matter that it is enough to ‘sleep well’ which in my case is 3 years of living expenses. I would never risk my 3 years of living expenses to rebalance into an arbitrary allocation.

“It is a terrible mistake for investors with long-term horizons – among them, pension funds, college endowments and savings-minded individuals – to measure their investment “risk” by their portfolio’s ratio of bonds to stocks. Often, high-grade bonds in an investment portfolio increase its risk.”

Warren Buffett 2017 shareholder letter
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

pascalwager
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Re: Do any of you not rebalance?

Post by pascalwager » Thu Mar 26, 2020 10:03 pm

I rebalance to 55/45, but my balance band is 20% of target allocation. Under normal market conditions, this results in rebalancing something like once every four years. But I did need to rebalance recently after the 30% drop.
Retired, pension, no SS | 55/45 | <1% cash | 20% rebalancing band

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Re: Do any of you not rebalance?

Post by Cubicle » Thu Mar 26, 2020 10:14 pm

100% equities. But I do hold several different kinds. So whenever I add funds & usually just try to add to equal all the holdings in terms of dollar value.
"Oh look another bajillion point declin-Ooooh!!! A coupon for pizza!!!!" <--- This is what everyone's IPS should be. ✓✓✓

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Re: Do any of you not rebalance?

Post by AznSaver » Fri Mar 27, 2020 1:08 am

Triple digit golfer wrote:
Thu Mar 26, 2020 8:18 pm
spm301 wrote:
Thu Mar 26, 2020 8:12 pm
I never re-balance, but its probably due to ignorance/stupidity. I figure if keep investing at my AA everything will balance out in the end.
That's what I was wondering. Time to go to portfolio visualizer and tinker!
I do not re-balance and contribute new money based on my AA (90/10). I have an expected long time horizon for investing/working, good insurance/alternative income streams if something changes that and a glide path in place for adjusting my AA as I get farther along in my accumulation (+5% bond per 10 years until 60/40).

Although I like the idea and reasoning behind re-balancing it seems like a value based market timing to me (My ignorance). I completely understand for those with a low risk tolerance or who have specific needs of their portfolio, if their AA gets unbalanced enough that they feel uneasy or can't sleep at night its a sound personal decision to address it.

Since I'm not savvy enough to determine a "true" low and can't predict what will happen I keep it simple...

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Triple digit golfer
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Re: Do any of you not rebalance?

Post by Triple digit golfer » Fri Mar 27, 2020 7:19 am

Ferdinand2014 wrote:
Thu Mar 26, 2020 9:45 pm
Triple digit golfer wrote:
Thu Mar 26, 2020 10:26 am
Hey Bogleheads,

Do we have any among us who do not rebalance their portfolios? If this is you, do you always contribute per your AA?

Maybe your desired AA is 70/30 and the market takes it up to 76/24 over a period of time. Do you always put new money in at 70/30 and essentially ignore the AA of the current portfolio?

Do you feel that you're missing out on any potential "buy low" times that rebalancing may offer, or are you content with new money to buy low?
I do not rebalance. I put 100% of new money into FXAIX (Fidelity 500 index fund). No, I do not feel I am missing out on anything. My plan as outlined, eliminates my human behavior because there are zero decisions to me made and it is all automatic.

I do not have an allocation ratio. I keep enough cash ‘to sleep well’ with everything else going into a low cost S&P 500 index fund every Friday without fail automatically. It does not matter if my ‘sleep well’ number is 5% or 50% of my portfolio. It does matter that it is enough to ‘sleep well’ which in my case is 3 years of living expenses. I would never risk my 3 years of living expenses to rebalance into an arbitrary allocation.

“It is a terrible mistake for investors with long-term horizons – among them, pension funds, college endowments and savings-minded individuals – to measure their investment “risk” by their portfolio’s ratio of bonds to stocks. Often, high-grade bonds in an investment portfolio increase its risk.”

Warren Buffett 2017 shareholder letter
Yes, I've seen you post that before and it always sticks with me. The simplicity of it is beautiful. Currently my AA has us around 26 months of living expenses including potential COBRA insurance in the case of unemployment, probably closer to 30 if we stretch it. Equities are about 80 months, not that that is meaningful in any way. 75/25 AA.

I am considering stopping bond contributions once we hit 3 years of living expenses. I am also considering keeping the 75/25 AA forever, but worry that will make us too bond-heavy in dollars. So I have some considerations to make.

Thank you for what you do during this COVID-19 crisis. Stay safe out there!

michoco911
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Re: Do any of you not rebalance?

Post by michoco911 » Fri Mar 27, 2020 7:23 am

Triple digit golfer wrote:
Thu Mar 26, 2020 10:26 am
Hey Bogleheads,

Do we have any among us who do not rebalance their portfolios? If this is you, do you always contribute per your AA?

Maybe your desired AA is 70/30 and the market takes it up to 76/24 over a period of time. Do you always put new money in at 70/30 and essentially ignore the AA
Actually, whenever investing new money, we do it in a way to make the overall new AA as 70/30 and not as 70/30 for the new money without any regard to the existing amount.
So after adding the new money, the final AA should be back to 70/30
30% VWRD 30% VUSD 40% AGGG until further notice

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Re: Do any of you not rebalance?

Post by flaccidsteele » Fri Mar 27, 2020 7:25 am

Triple digit golfer wrote:
Thu Mar 26, 2020 10:26 am
Hey Bogleheads,

Do we have any among us who do not rebalance their portfolios? If this is you, do you always contribute per your AA?

Maybe your desired AA is 70/30 and the market takes it up to 76/24 over a period of time. Do you always put new money in at 70/30 and essentially ignore the AA of the current portfolio?

Do you feel that you're missing out on any potential "buy low" times that rebalancing may offer, or are you content with new money to buy low?
Depends

When I “rebalance” during bears, some call it “market timing” and not true rebalancing

Whatever that means...
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat

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birdog
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Re: Do any of you not rebalance?

Post by birdog » Fri Mar 27, 2020 7:29 am

Here are the year-to-date returns for a number of different asset allocations using a simple Vanguard 3-Fund portfolio:

Image

https://awealthofcommonsense.com/2020/0 ... the-crash/

Might be worth a read. Short article.

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birdog
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Re: Do any of you not rebalance?

Post by birdog » Fri Mar 27, 2020 7:36 am

Triple digit golfer wrote:
Thu Mar 26, 2020 10:26 am
Hey Bogleheads,

Do we have any among us who do not rebalance their portfolios? If this is you, do you always contribute per your AA?

Maybe your desired AA is 70/30 and the market takes it up to 76/24 over a period of time. Do you always put new money in at 70/30 and essentially ignore the AA of the current portfolio?

Do you feel that you're missing out on any potential "buy low" times that rebalancing may offer, or are you content with new money to buy low?
Another great but short read:

https://www.bogleheads.org/wiki/Rebalancing

Seasonal
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Re: Do any of you not rebalance?

Post by Seasonal » Fri Mar 27, 2020 7:46 am

Bill Sharpe appears not to believe in rebalancing based on market movements, if I'm reading viewtopic.php?t=207804 correctly.

A fixed ratio of stocks/bonds is not a fixed amount of risk.

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Re: Do any of you not rebalance?

Post by climber2020 » Fri Mar 27, 2020 7:48 am

Triple digit golfer wrote:
Thu Mar 26, 2020 10:26 am
Do you always put new money in at 70/30 and essentially ignore the AA of the current portfolio?
This is what I do with new contributions to US & international stocks: always the same percentage split regardless of AA at the time. I found that this discourages me from tinkering and thinking too much about whether my international allocation is too high or too low.

I do look at my overall stock/bond allocation a few times a year and rebalance when necessary.

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Re: Do any of you not rebalance?

Post by glorat » Fri Mar 27, 2020 8:03 am

Triple digit golfer wrote:
Thu Mar 26, 2020 10:26 am
Do we have any among us who do not rebalance their portfolios? If this is you, do you always contribute per your AA?

Maybe your desired AA is 70/30 and the market takes it up to 76/24 over a period of time. Do you always put new money in at 70/30 and essentially ignore the AA of the current portfolio?

Do you feel that you're missing out on any potential "buy low" times that rebalancing may offer, or are you content with new money to buy low?
There's one more option... I never "rebalance" per wiki definition. So given your parameters, If I'm 76/24, I simply put my monthly new money 100% into bonds. If I'm 64/26, I put 100% into equities. Nice simple single transaction to execute and greatly reduces the likelihood I need to rebalance but I still end up buying the one that got "cheaper"

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Bluce
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Re: Do any of you not rebalance?

Post by Bluce » Fri Mar 27, 2020 8:12 am

birdog wrote:
Fri Mar 27, 2020 7:29 am
Here are the year-to-date returns for a number of different asset allocations using a simple Vanguard 3-Fund portfolio:

<SNIP CHART>

https://awealthofcommonsense.com/2020/0 ... the-crash/

Might be worth a read. Short article.
Interesting article -- thanks! In recent weeks I've only checked my "treading water" 30/70 PF from its high point on February 20 or YTD. So after reading that article, I went back farther. Here is what Schwabbie is showing:

- For the past 1 year I am down 1.23%

- For the past 2 years I am up 3.38%

So it's still "treading water" just fine -- even taking into account two risky bond funds that have dropped quite a bit, offset by a good chunk of Treasuries which have done well.
"There are no new ideas, only forgotten ones." -- Amity Shlaes

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birdog
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Re: Do any of you not rebalance?

Post by birdog » Fri Mar 27, 2020 8:15 am

climber2020 wrote:
Fri Mar 27, 2020 7:48 am
Triple digit golfer wrote:
Thu Mar 26, 2020 10:26 am
Do you always put new money in at 70/30 and essentially ignore the AA of the current portfolio?
This is what I do with new contributions to US & international stocks: always the same percentage split regardless of AA at the time. I found that this discourages me from tinkering and thinking too much about whether my international allocation is too high or too low.

I do look at my overall stock/bond allocation a few times a year and rebalance when necessary.
I do the opposite. My AA is 85-15 stock to bond. Last week when it was time for my monthly addition I saw that I was 84-16, so I bought VTI (total stock market index) instead of BIV (intermediate term bond index). It wouldn't seem logical to me to keep investing new monthly contributions at a ratio of 85% VTI and 15% BIV if my AA had drifted to 79-21 or 91-9. Plus, this discourages me from tinkering as the numbers tell me where to put the new dollars. I maintain my AA through monthly contributions and will also sell one fund to buy another if it gets too far out of whack. My AA is carefully chosen based on my risk tolerance, age and expected retirement date.

"The consensus among most financial professionals is that asset allocation is one of the most important decisions investors make. In other words, your selection of stocks or bonds is secondary to the way you allocate your assets to high and low-risk stocks, to short and long-term bonds, and to cash." https://www.investopedia.com/articles/03/032603.asp
Last edited by birdog on Fri Mar 27, 2020 8:17 am, edited 1 time in total.

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JoMoney
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Re: Do any of you not rebalance?

Post by JoMoney » Fri Mar 27, 2020 8:15 am

I have a very high equity "allocation". I do not rebalance, I have a general dollar figure that I like to keep as a "emergency fund" and I would never put that money into risky investments. When contemplating how that "bucket" gets refilled if/when it gets used, I've given it a minimum percentage, and if/when it gets down to the minimum I would draw on both stocks and bonds (keeping the cash at a min. relative percentage) until stocks begin rising, and I would "one way rebalance" from stocks to cash until that bucket is back at the more comfortable dollar figure.

I do not feel that i'm "missing out" on buying more equities. I'm still in a contribution phase and making regular periodic purchases the same as I always have. I find the volatility annoying, and the gambling like ferver some people get thinking they can play the volatility isn't a good thing.
Last edited by JoMoney on Fri Mar 27, 2020 8:19 am, edited 1 time in total.
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Triple digit golfer
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Re: Do any of you not rebalance?

Post by Triple digit golfer » Fri Mar 27, 2020 8:17 am

glorat wrote:
Fri Mar 27, 2020 8:03 am
Triple digit golfer wrote:
Thu Mar 26, 2020 10:26 am
Do we have any among us who do not rebalance their portfolios? If this is you, do you always contribute per your AA?

Maybe your desired AA is 70/30 and the market takes it up to 76/24 over a period of time. Do you always put new money in at 70/30 and essentially ignore the AA of the current portfolio?

Do you feel that you're missing out on any potential "buy low" times that rebalancing may offer, or are you content with new money to buy low?
There's one more option... I never "rebalance" per wiki definition. So given your parameters, If I'm 76/24, I simply put my monthly new money 100% into bonds. If I'm 64/26, I put 100% into equities. Nice simple single transaction to execute and greatly reduces the likelihood I need to rebalance but I still end up buying the one that got "cheaper"
I like this approach. But what would you do in the following, I admit, highly unlikely scenario:

$1 million portfolio
$700k equities
$300k bonds
New money $25k annually
Market crashes 60% and bonds go up 5%

Now you have $280k equities, $300k bonds and are at 47/53 portfolio from a desired 70/30.

Do you still just keep putting the $25k of new money to equities and leave it at 47/53 in the meantime, or do you rebalance into equities?

50/50
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Re: Do any of you not rebalance?

Post by 50/50 » Fri Mar 27, 2020 8:34 am

I don't rebalance. All interest, dividends and any new money goes into the fixed income side to offset stock gains. That has kept my ratio in good balance for many years. Once in a while it will get a little off target but usually works itself out in a short period of time.

glorat
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Re: Do any of you not rebalance?

Post by glorat » Fri Mar 27, 2020 9:14 am

Triple digit golfer wrote:
Fri Mar 27, 2020 8:17 am

I like this approach. But what would you do in the following, I admit, highly unlikely scenario:

$1 million portfolio
$700k equities
$300k bonds
New money $25k annually
Market crashes 60% and bonds go up 5%

Now you have $280k equities, $300k bonds and are at 47/53 portfolio from a desired 70/30.

Do you still just keep putting the $25k of new money to equities and leave it at 47/53 in the meantime, or do you rebalance into equities?
Well, I'd probably rebalance in that case.

Here's my actual situation... I've only been a Boglehead for less than 2 years and I never did decide what my rebalancing bands should be. But when the market tanked recently and I looked at my resultant AA, it hasn't moved off that far and I see new money is still enough to move the needle back. With "buy-and-hold" etched into my ethos, I'm trying to avoid selling, even if to buy.

That being said, with the 30% drop, I *am* on the edge of what I consider the time to rebalance so it may happen yet soon.

Swivelguy
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Re: Do any of you not rebalance?

Post by Swivelguy » Fri Mar 27, 2020 9:19 am

Triple digit golfer wrote:
Fri Mar 27, 2020 8:17 am
I like this approach. But what would you do in the following, I admit, highly unlikely scenario:

$1 million portfolio
$700k equities
$300k bonds
New money $25k annually
Market crashes 60% and bonds go up 5%

Now you have $280k equities, $300k bonds and are at 47/53 portfolio from a desired 70/30.

Do you still just keep putting the $25k of new money to equities and leave it at 47/53 in the meantime, or do you rebalance into equities?
I'm just some guy, but here's what I'd do (and because the current reality is a junior version of this scenario, am doing):

1. New money goes 100% into stocks
2. Wait for ~3 months of market stability or gains, determined subjectively
3. If stocks are still underweight at that point, rebalance

This strategy comes from a probably over-emphasized fear of amplifying losses by buying on the way down, but before the bottom. Looking at other crashes in the last 30 years, they tend to happen pretty fast (in under 3 months), and recover more slowly (over a year or three), so a 3-month waiting period to rebalance gives me the confidence that I'm not buying stock halfway through a crash. If I miss the bottom by a little on my re-balance, so what. Prices only matter when you make a transaction, so it's like that bottom never occurred, and I will have had some paychecks near the bottom to get those good prices dollar-cost-averaged in, at least a little.
Last edited by Swivelguy on Fri Mar 27, 2020 9:22 am, edited 1 time in total.

Call_Me_Op
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Re: Do any of you not rebalance?

Post by Call_Me_Op » Fri Mar 27, 2020 9:21 am

My IPS includes rebalancing rules that say I will always rebalance out of stocks, but rebalancing into stocks is optional and is prohibited if doing so will drop my SAFE assets below a certain threshold. I guess you could say that these asymmetric rebalancing rules are reflective of my fundamentally conservative nature. i always feewl good when taking money "off the table." but never seem comfortable when putting additional money "at risk."
Last edited by Call_Me_Op on Fri Mar 27, 2020 9:24 am, edited 1 time in total.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

Ferdinand2014
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Re: Do any of you not rebalance?

Post by Ferdinand2014 » Fri Mar 27, 2020 9:23 am

Triple digit golfer wrote:
Fri Mar 27, 2020 8:17 am
glorat wrote:
Fri Mar 27, 2020 8:03 am
Triple digit golfer wrote:
Thu Mar 26, 2020 10:26 am
Do we have any among us who do not rebalance their portfolios? If this is you, do you always contribute per your AA?

Maybe your desired AA is 70/30 and the market takes it up to 76/24 over a period of time. Do you always put new money in at 70/30 and essentially ignore the AA of the current portfolio?

Do you feel that you're missing out on any potential "buy low" times that rebalancing may offer, or are you content with new money to buy low?
There's one more option... I never "rebalance" per wiki definition. So given your parameters, If I'm 76/24, I simply put my monthly new money 100% into bonds. If I'm 64/26, I put 100% into equities. Nice simple single transaction to execute and greatly reduces the likelihood I need to rebalance but I still end up buying the one that got "cheaper"
I like this approach. But what would you do in the following, I admit, highly unlikely scenario:

$1 million portfolio
$700k equities
$300k bonds
New money $25k annually
Market crashes 60% and bonds go up 5%

Now you have $280k equities, $300k bonds and are at 47/53 portfolio from a desired 70/30.

Do you still just keep putting the $25k of new money to equities and leave it at 47/53 in the meantime, or do you rebalance into equities?
As your portfolio grows in relationship to your contributions, rebalancing with new money will tend to move the needle less over time.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

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birdog
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Re: Do any of you not rebalance?

Post by birdog » Fri Mar 27, 2020 9:25 am

Swivelguy wrote:
Fri Mar 27, 2020 9:19 am

I'm just some guy, but here's what I'd do (and because the current reality is a junior version of this scenario, am doing):

1. New money goes 100% into stocks
2. Wait for ~3 months of market stability or gains, determined subjectively
3. If stocks are still underweight at that point, rebalance

This strategy comes from a probably irrational fear of amplifying losses by buying on the way down, but before the bottom. Looking at other crashes in the last 30 years, they tend to happen pretty fast (in under 3 months), and recover more slowly (over a year or three), so a 3-month waiting period to rebalance gives me the confidence that I'm not buying stock halfway through a crash. If I miss the bottom by a little on my re-balance, so what. Prices only matter when you make a transaction, so it's like that bottom never occurred, and I will have had some paychecks near the bottom to get those good prices dollar-cost-averaged in, at least a little.
If you're describing your determination as subjective and your fear as irrational then you would probably benefit from an IPS.

https://www.bogleheads.org/wiki/Investm ... _statement

new2bogle
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Re: Do any of you not rebalance?

Post by new2bogle » Fri Mar 27, 2020 9:29 am

I don't rebalance. My 401k is in a 2045 retirement fund, so I guess the fund manager rebalances for me.

My backdoor roth and taxable are in total u.s. stocks.

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HomerJ
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Re: Do any of you not rebalance?

Post by HomerJ » Fri Mar 27, 2020 9:30 am

Triple digit golfer wrote:
Thu Mar 26, 2020 10:26 am
Hey Bogleheads,

Do we have any among us who do not rebalance their portfolios? If this is you, do you always contribute per your AA?

Maybe your desired AA is 70/30 and the market takes it up to 76/24 over a period of time. Do you always put new money in at 70/30 and essentially ignore the AA of the current portfolio?

Do you feel that you're missing out on any potential "buy low" times that rebalancing may offer, or are you content with new money to buy low?
I rebalance when my stock allocation gets too high, selling stocks to buy bonds...

My target AA is currently 45/55... When it got above 50/50, I'd rebalance back to 45/55, locking in those stock gains.

But when stocks are down, I don't normally rebalance the other direction. Yes, I'm 99.5% certain it would pay off for me, but my AA is not about maximizing returns, but balancing risk and return. And if the 0.5% chance shows up, I don't want to keep funneling my safe bond money into a stock market that doesn't recover for 30 years.

It's about managing risk. I'm close to retirement.

I do put NEW money 100% into stocks when the market is down though. That's surprisingly easy. Because it does feel like I'm buying on sale.
The J stands for Jay

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Triple digit golfer
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Re: Do any of you not rebalance?

Post by Triple digit golfer » Fri Mar 27, 2020 9:43 am

Call_Me_Op wrote:
Fri Mar 27, 2020 9:21 am
My IPS includes rebalancing rules that say I will always rebalance out of stocks, but rebalancing into stocks is optional and is prohibited if doing so will drop my SAFE assets below a certain threshold. I guess you could say that these asymmetric rebalancing rules are reflective of my fundamentally conservative nature. i always feewl good when taking money "off the table." but never seem comfortable when putting additional money "at risk."
The bold and underlined part for emphasis - this is where I am currently. I wouldn't say optional, as I like rules, but if my "safe" assets would drop below 2 years, I don't want to rebalance out of them and into stocks.

Over time, as my portfolio grows more and more, it will be less of a concern because at some point my 75/25 portfolio becomes say, 15x annual expenses (it's currently around 8), that'll be almost 4 years in bonds. It would take a 63% market crash at 15x expenses for a 75/25 portfolio to be rebalanced and have less than 2 years in bonds. So for now, at 8 years expenses at 75/25, we have 2 years in bonds. Therefore, I won't rebalance further into a market crash.

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Triple digit golfer
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Re: Do any of you not rebalance?

Post by Triple digit golfer » Fri Mar 27, 2020 9:48 am

HomerJ wrote:
Fri Mar 27, 2020 9:30 am
Triple digit golfer wrote:
Thu Mar 26, 2020 10:26 am
Hey Bogleheads,

Do we have any among us who do not rebalance their portfolios? If this is you, do you always contribute per your AA?

Maybe your desired AA is 70/30 and the market takes it up to 76/24 over a period of time. Do you always put new money in at 70/30 and essentially ignore the AA of the current portfolio?

Do you feel that you're missing out on any potential "buy low" times that rebalancing may offer, or are you content with new money to buy low?
I rebalance when my stock allocation gets too high, selling stocks to buy bonds...

My target AA is currently 45/55... When it got above 50/50, I'd rebalance back to 45/55, locking in those stock gains.

But when stocks are down, I don't normally rebalance the other direction. Yes, I'm 99.5% certain it would pay off for me, but my AA is not about maximizing returns, but balancing risk and return. And if the 0.5% chance shows up, I don't want to keep funneling my safe bond money into a stock market that doesn't recover for 30 years.

It's about managing risk. I'm close to retirement.

I do put NEW money 100% into stocks when the market is down though. That's surprisingly easy. Because it does feel like I'm buying on sale.
So in other words, you'll take stock gains off the table, but you won't lessen your bond portion (unless the bond market declines and does so itself). Do I have that right? I think that's a great approach for someone approaching retirement.

tibbitts
Posts: 9760
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Re: Do any of you not rebalance?

Post by tibbitts » Fri Mar 27, 2020 10:09 am

Triple digit golfer wrote:
Thu Mar 26, 2020 10:26 am
Hey Bogleheads,

Do we have any among us who do not rebalance their portfolios? If this is you, do you always contribute per your AA?

Maybe your desired AA is 70/30 and the market takes it up to 76/24 over a period of time. Do you always put new money in at 70/30 and essentially ignore the AA of the current portfolio?

Do you feel that you're missing out on any potential "buy low" times that rebalancing may offer, or are you content with new money to buy low?
I'm over the part of my life where there is any "new money", and I don't rebalance. Bogle didn't feel rebalancing was particularly important.

During times when markets seem significantly down I spend out of cash or fixed income. Although even at this level, on the way up I didn't feel markets were especially low, so I'm not sure why I should feel they're especially low now.

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HomerJ
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Re: Do any of you not rebalance?

Post by HomerJ » Fri Mar 27, 2020 10:18 am

Triple digit golfer wrote:
Fri Mar 27, 2020 9:48 am
HomerJ wrote:
Fri Mar 27, 2020 9:30 am
Triple digit golfer wrote:
Thu Mar 26, 2020 10:26 am
Hey Bogleheads,

Do we have any among us who do not rebalance their portfolios? If this is you, do you always contribute per your AA?

Maybe your desired AA is 70/30 and the market takes it up to 76/24 over a period of time. Do you always put new money in at 70/30 and essentially ignore the AA of the current portfolio?

Do you feel that you're missing out on any potential "buy low" times that rebalancing may offer, or are you content with new money to buy low?
I rebalance when my stock allocation gets too high, selling stocks to buy bonds...

My target AA is currently 45/55... When it got above 50/50, I'd rebalance back to 45/55, locking in those stock gains.

But when stocks are down, I don't normally rebalance the other direction. Yes, I'm 99.5% certain it would pay off for me, but my AA is not about maximizing returns, but balancing risk and return. And if the 0.5% chance shows up, I don't want to keep funneling my safe bond money into a stock market that doesn't recover for 30 years.

It's about managing risk. I'm close to retirement.

I do put NEW money 100% into stocks when the market is down though. That's surprisingly easy. Because it does feel like I'm buying on sale.
So in other words, you'll take stock gains off the table, but you won't lessen your bond portion (unless the bond market declines and does so itself). Do I have that right? I think that's a great approach for someone approaching retirement.
Yes, it's fairly easy...

DURING retirement, I plan to "rebalance" mostly the same way...

if stocks are way up, I'll withdraw mostly from stocks, and even sell stocks to get back to my target AA...

But if stocks are down, I'll withdraw mostly from bonds, which will rebalance my AA a little bit, but I won't sell bonds to buy stocks.. I'll just keep withdrawing mostly from bonds until stocks recover, and naturally get my AA back to its target.
The J stands for Jay

iamblessed
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Re: Do any of you not rebalance?

Post by iamblessed » Fri Mar 27, 2020 10:26 am

I don't rebalance. I have a stock/cash barbell. If my cash bucket gets low I refill in good years.

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goingup
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Re: Do any of you not rebalance?

Post by goingup » Fri Mar 27, 2020 10:37 am

Not really. Now retired without much in the way of new contributions, I let the 60/40 portfolio drift by up (and down) by up to 10%.

It's really more of a philosophy about our portfolio. Hold the reins loosely. Don't oversteer. Don't tinker. Good enough is good enough. Keeping a floor of 10-12 years of bonds/cash is the most important thing to me.

Call_Me_Op
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Re: Do any of you not rebalance?

Post by Call_Me_Op » Fri Mar 27, 2020 10:41 am

iamblessed wrote:
Fri Mar 27, 2020 10:26 am
I don't rebalance. I have a stock/cash barbell. If my cash bucket gets low I refill in good years.
Isn't that rebalancing?
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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