Is anyone else pretty lax with their AA?

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Topic Author
JD2775
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Is anyone else pretty lax with their AA?

Post by JD2775 »

I hadn't checked for a while but I noticed my AA, which I had "designated" as 70/30, has drifted to 77/23. My initial thought was meh, whatever. Then I thought about it some more and thought as long as it stays above 80/20 I don't really care that much. If it drifts beyond that I will, and will definitely rebalance at that point.

But, I don't want to change my AA to 80/20 because then I would be tempted to drift to 90/10 and I don't think that's good for my current circumstance.

Just curious if others AA aren't set in stone, and are more of a general guideline +/- a certain % amount (I am not referring to 5% rebalancing bands)
MarkRoulo
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Re: Is anyone else pretty lax with their AA?

Post by MarkRoulo »

JD2775 wrote: Wed Jan 20, 2021 9:24 pm I hadn't checked for a while but I noticed my AA, which I had "designated" as 70/30, has drifted to 77/23. My initial thought was meh, whatever. Then I thought about it some more and thought as long as it stays above 80/20 I don't really care that much. If it drifts beyond that I will, and will definitely rebalance at that point.

But, I don't want to change my AA to 80/20 because then I would be tempted to drift to 90/10 and I don't think that's good for my current circumstance.

Just curious if others AA aren't set in stone, and are more of a general guideline +/- a certain % amount (I am not referring to 5% rebalancing bands)
Yes, my AA isn't set in stone.

So ... does this help you do something?
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JD2775
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Re: Is anyone else pretty lax with their AA?

Post by JD2775 »

MarkRoulo wrote: Wed Jan 20, 2021 9:29 pm
JD2775 wrote: Wed Jan 20, 2021 9:24 pm I hadn't checked for a while but I noticed my AA, which I had "designated" as 70/30, has drifted to 77/23. My initial thought was meh, whatever. Then I thought about it some more and thought as long as it stays above 80/20 I don't really care that much. If it drifts beyond that I will, and will definitely rebalance at that point.

But, I don't want to change my AA to 80/20 because then I would be tempted to drift to 90/10 and I don't think that's good for my current circumstance.

Just curious if others AA aren't set in stone, and are more of a general guideline +/- a certain % amount (I am not referring to 5% rebalancing bands)
Yes, my AA isn't set in stone.

So ... does this help you do something?
Thanks. Yes, it helps me not think it's rigid and set in stone. I realize there are re-balancing bands to keep it from going out of whack but my attitude seems to be even more lax than that. Maybe that means I am too conservative, I don't know
KlangFool
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Re: Is anyone else pretty lax with their AA?

Post by KlangFool »

JD2775 wrote: Wed Jan 20, 2021 9:24 pm I hadn't checked for a while but I noticed my AA, which I had "designated" as 70/30, has drifted to 77/23. My initial thought was meh, whatever. Then I thought about it some more and thought as long as it stays above 80/20 I don't really care that much. If it drifts beyond that I will, and will definitely rebalance at that point.

But, I don't want to change my AA to 80/20 because then I would be tempted to drift to 90/10 and I don't think that's good for my current circumstance.

Just curious if others AA aren't set in stone, and are more of a general guideline +/- a certain % amount (I am not referring to 5% rebalancing bands)
JD2775,

You do not have an AA. If that does not bother you, why it should matter to others? If you want to maintain your AA, you should write down in your IPS as to when you have to rebalance.

<<Just curious if others AA aren't set in stone, and are more of a general guideline +/- a certain % amount (I am not referring to 5% rebalancing bands)>>


This is personal finance. If you do not maintain your AA, you suffer the consequences. You should ask yourself why you should maintain your AA or do not maintain your AA. Please note that this is a slippery slope. If you refuse to write this down in your IPS, then, your AA would change as per your feeling at any moment.


KlangFool
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JD2775
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Re: Is anyone else pretty lax with their AA?

Post by JD2775 »

KlangFool wrote: Wed Jan 20, 2021 9:32 pm
JD2775 wrote: Wed Jan 20, 2021 9:24 pm I hadn't checked for a while but I noticed my AA, which I had "designated" as 70/30, has drifted to 77/23. My initial thought was meh, whatever. Then I thought about it some more and thought as long as it stays above 80/20 I don't really care that much. If it drifts beyond that I will, and will definitely rebalance at that point.

But, I don't want to change my AA to 80/20 because then I would be tempted to drift to 90/10 and I don't think that's good for my current circumstance.

Just curious if others AA aren't set in stone, and are more of a general guideline +/- a certain % amount (I am not referring to 5% rebalancing bands)
JD2775,

You do not have an AA. If that does not bother you, why it should matter to others? If you want to maintain your AA, you should write down in your IPS as to when you have to rebalance.

<<Just curious if others AA aren't set in stone, and are more of a general guideline +/- a certain % amount (I am not referring to 5% rebalancing bands)>>


This is personal finance. If you do not maintain your AA, you suffer the consequences. You should ask yourself why you should maintain your AA or do not maintain your AA. Please note that this is a slippery slope. If you refuse to write this down in your IPS, then, your AA would change as per your feeling at any moment.


KlangFool
Good points, thank you KF
KlangFool
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Re: Is anyone else pretty lax with their AA?

Post by KlangFool »

JD2775 wrote: Wed Jan 20, 2021 9:33 pm
KlangFool wrote: Wed Jan 20, 2021 9:32 pm
JD2775 wrote: Wed Jan 20, 2021 9:24 pm I hadn't checked for a while but I noticed my AA, which I had "designated" as 70/30, has drifted to 77/23. My initial thought was meh, whatever. Then I thought about it some more and thought as long as it stays above 80/20 I don't really care that much. If it drifts beyond that I will, and will definitely rebalance at that point.

But, I don't want to change my AA to 80/20 because then I would be tempted to drift to 90/10 and I don't think that's good for my current circumstance.

Just curious if others AA aren't set in stone, and are more of a general guideline +/- a certain % amount (I am not referring to 5% rebalancing bands)
JD2775,

You do not have an AA. If that does not bother you, why it should matter to others? If you want to maintain your AA, you should write down in your IPS as to when you have to rebalance.

<<Just curious if others AA aren't set in stone, and are more of a general guideline +/- a certain % amount (I am not referring to 5% rebalancing bands)>>


This is personal finance. If you do not maintain your AA, you suffer the consequences. You should ask yourself why you should maintain your AA or do not maintain your AA. Please note that this is a slippery slope. If you refuse to write this down in your IPS, then, your AA would change as per your feeling at any moment.


KlangFool
Good points, thank you KF
JD2775,

It is very common for folks to be lax on their AA in a bull run. Then, they let their AA drift. Then, the market crashes, and they were reminded too late as to why they have a targeted AA in the first place. They weren't supposed to take too much RISK.

You should check out this thread. Aka, having a fixed AA and rebalancing was very profitable in 2020.


viewtopic.php?t=335902


KlangFool
Normchad
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Re: Is anyone else pretty lax with their AA?

Post by Normchad »

I’m not super obsessive about it.

I really only look at it in Jan 1 each year. That’s my typical behavior.

Admittedly, I did look at it again back in Mar 2020, and did some TLH and rebalancing.
JSPECO9
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Re: Is anyone else pretty lax with their AA?

Post by JSPECO9 »

If it makes you feel any better Jack Bogle himself suggested wide bands. But as others already mentioned, that's a personal decision you must make while measuring your risk tolerance.
MarkRoulo
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Re: Is anyone else pretty lax with their AA?

Post by MarkRoulo »

JD2775 wrote: Wed Jan 20, 2021 9:31 pm
MarkRoulo wrote: Wed Jan 20, 2021 9:29 pm
JD2775 wrote: Wed Jan 20, 2021 9:24 pm I hadn't checked for a while but I noticed my AA, which I had "designated" as 70/30, has drifted to 77/23. My initial thought was meh, whatever. Then I thought about it some more and thought as long as it stays above 80/20 I don't really care that much. If it drifts beyond that I will, and will definitely rebalance at that point.

But, I don't want to change my AA to 80/20 because then I would be tempted to drift to 90/10 and I don't think that's good for my current circumstance.

Just curious if others AA aren't set in stone, and are more of a general guideline +/- a certain % amount (I am not referring to 5% rebalancing bands)
Yes, my AA isn't set in stone.

So ... does this help you do something?
Thanks. Yes, it helps me not think it's rigid and set in stone. I realize there are re-balancing bands to keep it from going out of whack but my attitude seems to be even more lax than that. Maybe that means I am too conservative, I don't know
A good followup question that you did NOT ask (but maybe should have) is whether I actively change my asset allocation without having a fixed asset allocation.

I do not.

My asset allocation drifts because I mostly don't re-balance ... because mostly when money goes into something (stock fund, bond fund, whatever) it stays there.

When I was contributing (more) I tended to put the new money into the area that was lagging, so there was *some* re-balancing because of the new money. I never moved money from stock to bonds (or the other way) based on my opinion of what the stock (or bond) market was going to do, however.

Lax because you are mostly ignoring things is different from lax because you are fooling yourself into changing your risk profile based on your mood :-)
BabaWawa
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Re: Is anyone else pretty lax with their AA?

Post by BabaWawa »

I have a feeling that your attitude may be influenced by how well the market has been doing recently reaching all time highs. This euphoria can lead to poor decisions, IMO. If your investment policy statement calls for you to rebalance, then I would do it. You are now taking on more risk than you originally wanted to... And you're doing it when stocks are at a frothy level.
Last edited by BabaWawa on Wed Jan 20, 2021 9:55 pm, edited 1 time in total.
Topic Author
JD2775
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Re: Is anyone else pretty lax with their AA?

Post by JD2775 »

Thanks for the responses everyone. This place is great, it keeps me in check and makes me realize that sometimes I do not think things through all the way
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whodidntante
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Re: Is anyone else pretty lax with their AA?

Post by whodidntante »

I don't think AA works unless you regularly attend the meetings. :happy
Topic Author
JD2775
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Re: Is anyone else pretty lax with their AA?

Post by JD2775 »

whodidntante wrote: Wed Jan 20, 2021 9:48 pm I don't think AA works unless you regularly attend the meetings. :happy
hear hear.... :sharebeer
chw
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Re: Is anyone else pretty lax with their AA?

Post by chw »

It seems you are looking affirmation for your lack of a plan and/or rebalancing. Not saying you’re right or wrong, but the general advice here is to set up a plan with your IPS, and follow that plan through your investing life- which usually includes triggers for rebalancing.
Triple digit golfer
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Re: Is anyone else pretty lax with their AA?

Post by Triple digit golfer »

I don't think it is a big deal.

Are you still contributing? What is the ratio?
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Re: Is anyone else pretty lax with their AA?

Post by radiowave »

I don't think its as much discipline maintaining AA, but understanding the underlying assumption of risk/reward of your asset allocation. I've been using 55/45 in my pre-retirement AA with a plan to cross into retirement at 50/50, but that assumption was based on a bond/CD return of a nominal 2-3% return/yr which is no longer the case. So I'm having a thoughtful dialog with myself what would be an appropriate AA transitioning to retirement this year. My working plan is to change my IPS to 60/40 into retirement and use 5% (+- 2.5%) as bands to adjust the portfolio on a quarterly basis.
Last edited by radiowave on Wed Jan 20, 2021 10:20 pm, edited 1 time in total.
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Topic Author
JD2775
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Re: Is anyone else pretty lax with their AA?

Post by JD2775 »

Triple digit golfer wrote: Wed Jan 20, 2021 9:59 pm I don't think it is a big deal.

Are you still contributing? What is the ratio?
I am. It's roughly 70/30 on new contributions. I say roughly because my taxable contributions change slightly each month, depending on what's left to invest after all other bills and investments are made
Triple digit golfer
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Re: Is anyone else pretty lax with their AA?

Post by Triple digit golfer »

JD2775 wrote: Wed Jan 20, 2021 10:10 pm
Triple digit golfer wrote: Wed Jan 20, 2021 9:59 pm I don't think it is a big deal.

Are you still contributing? What is the ratio?
I am. It's roughly 70/30 on new contributions. I say roughly because my taxable contributions change slightly each month, depending on what's left to invest after all other bills and investments are made
You can just change contributions to 0/100 and that'll at least get you closer without doing an actual rebalance.
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StevieG72
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Re: Is anyone else pretty lax with their AA?

Post by StevieG72 »

I have a rather conservative AA at 65/35. I have let mine drift to 70/30 and I am not too concerned. One of my challenges is not having tax deferred space for bonds. The bond options for taxable are less favorable IMO.
I plan on adjusting weekly purchases to bonds vs. stocks.
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baconavocado
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Re: Is anyone else pretty lax with their AA?

Post by baconavocado »

When my AA drifts 1%, I'll correct it, as long as it isn't happening during a period of random volatility. In other words, as long as I'm reasonably sure my correction won't be reversed by the market in a matter of days.
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Re: Is anyone else pretty lax with their AA?

Post by JS-Elcano »

KlangFool wrote: Wed Jan 20, 2021 9:32 pm
JD2775 wrote: Wed Jan 20, 2021 9:24 pm I hadn't checked for a while but I noticed my AA, which I had "designated" as 70/30, has drifted to 77/23. My initial thought was meh, whatever. Then I thought about it some more and thought as long as it stays above 80/20 I don't really care that much. If it drifts beyond that I will, and will definitely rebalance at that point.

But, I don't want to change my AA to 80/20 because then I would be tempted to drift to 90/10 and I don't think that's good for my current circumstance.

Just curious if others AA aren't set in stone, and are more of a general guideline +/- a certain % amount (I am not referring to 5% rebalancing bands)
JD2775,

You do not have an AA. If that does not bother you, why it should matter to others? If you want to maintain your AA, you should write down in your IPS as to when you have to rebalance.

<<Just curious if others AA aren't set in stone, and are more of a general guideline +/- a certain % amount (I am not referring to 5% rebalancing bands)>>


This is personal finance. If you do not maintain your AA, you suffer the consequences. You should ask yourself why you should maintain your AA or do not maintain your AA. Please note that this is a slippery slope. If you refuse to write this down in your IPS, then, your AA would change as per your feeling at any moment.


KlangFool
I follow my portfolio daily, but I only rebalance twice a year on set dates (January 1, July 1) if my AA is out of balance by 5% or more. So, this run-up since the start of the year and the distortion of my AA it has caused doesn't phase me. If it's still out of balance on July 1, then I will rebalance back to 60/40.
sailaway
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Re: Is anyone else pretty lax with their AA?

Post by sailaway »

We only add it all up twice a year and let it do whatever it wants in between, bit we do rebalance then if it is a few percent off.
Marseille07
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Re: Is anyone else pretty lax with their AA?

Post by Marseille07 »

If the OP was 70/30 and now 77/23, I don't think it's a big deal, if not beneficial. I'm sensing that the OP's AA was too conservative and there's nothing wrong letting it loose a bit.
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Bungo
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Re: Is anyone else pretty lax with their AA?

Post by Bungo »

My AA is 60/40. I check every few months, and if it is out of balance by more than 5% (say 65/35 or 55/45), I rebalance. Anything less than that I ignore.
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Re: Is anyone else pretty lax with their AA?

Post by texasdiver »

Our target AA is 65/35. Right now it has crept up to about 67/33. I'm not really sweating it.

We have simplified our holdings as much as possible between my wife and me and we still have 7 separate accounts across the TSP, Vanguard, Fidelity, and an employer-specific cash-balance plan. Four are still receiving funds and three are legacy accounts. It is pretty damn hard to keep everything perfectly set without a lot of slicing and dicing and making our holdings more complex.

Right now new money is going in at a 50/50 allocation rate which slowly pulls things back in that direction
Pandemic Bangs
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Re: Is anyone else pretty lax with their AA?

Post by Pandemic Bangs »

JD2775 wrote: Wed Jan 20, 2021 9:24 pm my AA, which I had "designated" as 70/30, has drifted to 77/23.
Yes, I have been very lax. I did not get burned (well, not by that). I thought I was 70:30. I actually was nearly 90:10 before I woke up. Spouse and I were so busy with work and family that our taxable and tax-deferred investment contribution changes were too small to move the needle on our existing assets that were growing asymmetrically in the background. Lots and lots of little pieces from prior employers, etc.

I fixed it and am not lax anymore.

Staying at 90:10, as inappropriate as that was for our age and stage, would have been nice for these last few years but I guess I am too smart for that now. :D
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JayDee37
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Re: Is anyone else pretty lax with their AA?

Post by JayDee37 »

Personally I think of rebalancing as a consistent way to “buy low, sell high.” I usually look at doing this twice a year, have to actually make a change once a year. Whichever sector has been going up to the point that it is getting ahead of where I want it to be gets sold, the lagging or declining sector gets bought. I consider it locking in the gains as much as I consider it mitigating risk. This is if I’m rebalancing in tax-advantaged space so there are no tax implications for the transaction. In taxable space I will just direct new investments towards whatever sector is light. And I do set my percentages of new investments in tax-advantaged space with more going into the lagging sector. My desired overall AA to bonds is 17%, but 22% of my regular contributions go to bonds. Even so I still had to rebalance into bonds at the beginning of this year because stocks had outpaced bonds so much.
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Exchme
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Re: Is anyone else pretty lax with their AA?

Post by Exchme »

I realize the literature says that rebalancing is not a big deal since the market can keep going up or down way past where you thought was reasonable, but the more I look at it, I think I will do better with tight rebalancing bands.

My logic is that if I let greed overcome fear in a bull market, then when the downturn comes, I will have an excess stock allocation. In a bear, the emotion would be to have less stock allocation on the way down and leave me with too low a stock allocation for the ride back up. So even if it's no better on average, running a tight band around my AA gives me a tool that takes the emotion out of it to help me avoid doing really dumb things (well somewhat).

For the OP's case, if the desired AA was 70/30, but floated up to 77/23, then on a $1MM total basis with no change in $300K of bonds, the stocks would have gone from $700K to $1MM. If that's not time to rebalance, then what is?
Triple digit golfer
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Re: Is anyone else pretty lax with their AA?

Post by Triple digit golfer »

Exchme wrote: Thu Jan 21, 2021 8:29 am I realize the literature says that rebalancing is not a big deal since the market can keep going up or down way past where you thought was reasonable, but the more I look at it, I think I will do better with tight rebalancing bands.

My logic is that if I let greed overcome fear in a bull market, then when the downturn comes, I will have an excess stock allocation. In a bear, the emotion would be to have less stock allocation on the way down and leave me with too low a stock allocation for the ride back up. So even if it's no better on average, running a tight band around my AA gives me a tool that takes the emotion out of it to help me avoid doing really dumb things (well somewhat).
Nothing wrong with tight bands if you can rebalance inside a tax advantaged account. If you're an accumulator, just direct new contributions to the lagging accounts to the extent that you can. This will probably negate the need to rebalance very often, even with tight bands.
ImUrHuckleberry
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Re: Is anyone else pretty lax with their AA?

Post by ImUrHuckleberry »

I rebalance 2x per year and also direct new contributions in a manner that keeps us from drifting too far off our targets. I would probably just stick with 2x per year even if we didn't have new contributions regularly.
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Re: Is anyone else pretty lax with their AA?

Post by Sandtrap »

10% for me. More peace of mind for DW and I to not fret over minor ups and downs as they seem to even out over time.

OP: you have to find what works for you, stress level, "sleep factor", etc. It doesn't have to be precise, just good enough.

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robphoto
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Re: Is anyone else pretty lax with their AA?

Post by robphoto »

For marital harmony, we're at 60/40, though I'd like to be 70/30.

Early last year, I had to rebalance into bonds (when stocks hit 65% of the portfolio).

The "reward," was the fun of rebalancing into stocks in April, or whenever it was that my stocks went down to 55% of total.

Anyway, so gamifying it lets me follow my AA.

And like people said, if you randomly let it drift or not drift, you don't really have an AA.
Flextruck
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Re: Is anyone else pretty lax with their AA?

Post by Flextruck »

I am certainly aggressive with my AA. I looked last night at my Roth and realized I'm roughly 90/10. It occurred to me that a downturn would really impact my numbers but at 45, soon to be 46, I'm going to let it ride for a few more years. I see no reason to move conservative until I'm in my early 50s.

Our portfolio was roughly 245k in March after the initial Covid dive. Today's balance is nearly 400k. That wouldn't be possible with a more conservative blend.
KlangFool
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Re: Is anyone else pretty lax with their AA?

Post by KlangFool »

Flextruck wrote: Thu Jan 21, 2021 9:19 am I am certainly aggressive with my AA. I looked last night at my Roth and realized I'm roughly 90/10. It occurred to me that a downturn would really impact my numbers but at 45, soon to be 46, I'm going to let it ride for a few more years. I see no reason to move conservative until I'm in my early 50s.

Our portfolio was roughly 245k in March after the initial Covid dive. Today's balance is nearly 400k. That wouldn't be possible with a more conservative blend.
Flextruck,

<<I am certainly aggressive with my AA.>>


The issue here is not about whether you have an aggressive AA. The issue here is whether you have a fixed AA and whether you maintained your AA.

What is your targeted AA? And, do you let your AA drift too far from your targeted AA?

<< It occurred to me that a downturn would really impact my numbers but at 45, soon to be 46, I'm going to let it ride for a few more years. I see no reason to move conservative until I'm in my early 50s. >>

What if we hit a downturn and it does not recover until your early 50s?


And, you are unemployed or under-employed?


Can you wait for the recovery?

Many of my peers went through this in Telecom Bust. The stock market goes down and they lost their job security at the same time. The job security never came back.


KlangFool
rich126
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Re: Is anyone else pretty lax with their AA?

Post by rich126 »

KlangFool wrote: Thu Jan 21, 2021 9:49 am
Flextruck wrote: Thu Jan 21, 2021 9:19 am I am certainly aggressive with my AA. I looked last night at my Roth and realized I'm roughly 90/10. It occurred to me that a downturn would really impact my numbers but at 45, soon to be 46, I'm going to let it ride for a few more years. I see no reason to move conservative until I'm in my early 50s.

Our portfolio was roughly 245k in March after the initial Covid dive. Today's balance is nearly 400k. That wouldn't be possible with a more conservative blend.
Flextruck,

<<I am certainly aggressive with my AA.>>


The issue here is not about whether you have an aggressive AA. The issue here is whether you have a fixed AA and whether you maintained your AA.

What is your targeted AA? And, do you let your AA drift too far from your targeted AA?

<< It occurred to me that a downturn would really impact my numbers but at 45, soon to be 46, I'm going to let it ride for a few more years. I see no reason to move conservative until I'm in my early 50s. >>

What if we hit a downturn and it does not recover until your early 50s?


And, you are unemployed or under-employed?


Can you wait for the recovery?

Many of my peers went through this in Telecom Bust. The stock market goes down and they lost their job security at the same time. The job security never came back.


KlangFool
I'm not someone who does the AA thing but I agree with KlangFool. It is easy to get complacent while times are good but usually people don't lose jobs during the good times, it often happens when everything else goes south (stock, housing, economy).

I've could take more risks since it was only me (I don't have a family to support) and for 2/3 of my career I had a safe government job. If I had a family counting on me, and was in a risky sector (well most jobs can be risky) for jobs, the goal should be financial safety and not to maximize returns since the latter adds sizable risks.
mauwong
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Re: Is anyone else pretty lax with their AA?

Post by mauwong »

I'm comfortable with letting my equity drift from 60 to 70%, provided I meet my minimum cash/bond target.
international001
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Re: Is anyone else pretty lax with their AA?

Post by international001 »

I am always debating with myself what should be the optimal SCV, international, etc, tilting. And I typically don't get more granular than 10%.
It would be stupid trying to keep my AA tighter than that 10% (via rebalancing). If you have come up with a very precise AA, then it may make sense to rebalance more often.

But it seems more than annually would not have any benefits: https://www.vanguard.co.uk/documents/ad ... ancing.pdf

What I really struggle with is AA on taxable. Lots of optimizations and compromises to not loose money on tax. If rebalanced too much on taxable, costs could outweigh the benefits
Exchme
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Re: Is anyone else pretty lax with their AA?

Post by Exchme »

Triple digit golfer wrote: Thu Jan 21, 2021 8:34 am
Exchme wrote: Thu Jan 21, 2021 8:29 am I realize the literature says that rebalancing is not a big deal since the market can keep going up or down way past where you thought was reasonable, but the more I look at it, I think I will do better with tight rebalancing bands.

My logic is that if I let greed overcome fear in a bull market, then when the downturn comes, I will have an excess stock allocation. In a bear, the emotion would be to have less stock allocation on the way down and leave me with too low a stock allocation for the ride back up. So even if it's no better on average, running a tight band around my AA gives me a tool that takes the emotion out of it to help me avoid doing really dumb things (well somewhat).
Nothing wrong with tight bands if you can rebalance inside a tax advantaged account. If you're an accumulator, just direct new contributions to the lagging accounts to the extent that you can. This will probably negate the need to rebalance very often, even with tight bands.
Thanks for the thoughts, I have been leaving the paycheck in cash and the silly market has still been going up so fast that I've still had to do small rebalancing moves just to keep up. Yes doing this in tax advantaged accounts, I had a mess with a lot of funds with small balances in various accounts (401Ks & T-IRAs for both myself and DW, plus an inherited IRA), so taking Boglehead advice and using the rebalancing to bonds as an opportunity to get rid of the smallest funds and simplify life a bit.
Godot
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Re: Is anyone else pretty lax with their AA?

Post by Godot »

whodidntante wrote: Wed Jan 20, 2021 9:48 pm I don't think AA works unless you regularly attend the meetings. :happy
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UpperNwGuy
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Re: Is anyone else pretty lax with their AA?

Post by UpperNwGuy »

I rebalance every January, if needed. The rest of the year I watch for significant, persistent out-of-boundary conditions. On March 23, 2020 the stock portion of my portfolio had dropped enough to be significant, but on March 24, 2020 it had gained back just enough to be within bounds, and then it kept on gaining, so it failed my persistence test, and I didn't rebalance. It's a taxable account, so I try to minimize selling, even for rebalancing.
secondopinion
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Re: Is anyone else pretty lax with their AA?

Post by secondopinion »

JD2775 wrote: Wed Jan 20, 2021 9:24 pm Just curious if others AA aren't set in stone, and are more of a general guideline +/- a certain % amount (I am not referring to 5% rebalancing bands)
Mine is fairly flexible in my taxable account (50%-80% stocks). It greatly depends on what is a good deal at the time with my funds; whether that is tax loss harvesting, stocks, bonds, CDs, etc.

My retirement accounts are more static at 70% or so in stocks.
It is better to be half-wrong than have a 50% chance of being all-wrong. With the former, you will learn and have money to try again. Otherwise, you will never learn and will have nothing eventually.
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oncorhynchus
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Re: Is anyone else pretty lax with their AA?

Post by oncorhynchus »

I'm not as lax.

I've worked hard trying to replace FOMO, financial-pundit noise, and "irrational exuberance" with the discipline of an IPS and a fixed AA of 75:25, using a modified three-fund portfolio. While I'm still in the accumulation phase, I try to keep to my AA +/- 1%, re-evaluating/re-balancing with each paycheck contribution. I use Quicken so it's easy to see how close I hew to my AA across multiple accounts, on a daily basis if necessary.

YMMV,

o
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jginseattle
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Re: Is anyone else pretty lax with their AA?

Post by jginseattle »

I would say flexible, not lax. My situation changed last year resulting in less need to take risk. Therefore, I adjusted my AA accoringly.
tesuzuki2002
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Re: Is anyone else pretty lax with their AA?

Post by tesuzuki2002 »

JD2775 wrote: Wed Jan 20, 2021 9:24 pm I hadn't checked for a while but I noticed my AA, which I had "designated" as 70/30, has drifted to 77/23. My initial thought was meh, whatever. Then I thought about it some more and thought as long as it stays above 80/20 I don't really care that much. If it drifts beyond that I will, and will definitely rebalance at that point.

But, I don't want to change my AA to 80/20 because then I would be tempted to drift to 90/10 and I don't think that's good for my current circumstance.

Just curious if others AA aren't set in stone, and are more of a general guideline +/- a certain % amount (I am not referring to 5% rebalancing bands)
It's a target... I keep mine in the ballpark...but I don't fiddle with it much...
JBTX
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Re: Is anyone else pretty lax with their AA?

Post by JBTX »

As the market has been going up, I have been more diligent in rebalancing.
VinoVita
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Re: Is anyone else pretty lax with their AA?

Post by VinoVita »

whodidntante wrote: Wed Jan 20, 2021 9:48 pm I don't think AA works unless you regularly attend the meetings. :happy
whodidntante,
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placeholder
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Re: Is anyone else pretty lax with their AA?

Post by placeholder »

The only thing my spreadsheet is reporting to me with its 5/25 rebalancing analysis is that REIT is low but I'm still trying to figure out what to do with that.
Bama12
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Re: Is anyone else pretty lax with their AA?

Post by Bama12 »

I have a soft 5% rule.

I really never worry about.
carminered2019
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Re: Is anyone else pretty lax with their AA?

Post by carminered2019 »

my AA is 60/40 to 95/5. Last March low I went from 60/40 to 95/5 then I moved back to 70/30 recently.
MathWizard
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Re: Is anyone else pretty lax with their AA?

Post by MathWizard »

If you go 100% stocks or nearly so, there is no drift.

Now that I am not 100% , it does drift. I have contributions
set to my target AA, and these keep it from drifting too far, but I did need to rebalance a week ago

Who knew my portfolio would grow 15% in 2020 ? In March it looked like the market was going to topple over. 10% swings from day to day. I didn't rebalance then due to the wild oscillations.
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