Author Topic: Time to rebalance?  (Read 2629 times)

Prchawkeye

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Time to rebalance?
« on: January 20, 2016, 03:48:01 PM »
Hello all,

I was curious to know if anyone on here has rebalanced their portfolio or is thinking about rebalancing given the current market downturn? Are you considering a more aggressive or conservative allocation given the markets condition?

As of yesterday I was out balance by about 5%. Current target allocationis 80% equities and 20% bonds, so now I'm at about 75% equities and 25% bonds. I had never rebalanced before, usually I just throw my income at whatever is lagging in my allocation, but in these current market conditions I can't keep up with fall in equities.

Also, I was thinking of taking some "play" money and going long in oil. Feel free to comment on that as well.

Thanks




DaveR

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Re: Time to rebalance?
« Reply #1 on: January 20, 2016, 04:00:29 PM »
A number of things to consider, but at 5% out, it's worth looking at.

See the Vanguard write up: http://www.vanguard.com/pdf/icrpr.pdf

Cash (aka income) is part of the equation too, so depending on amounts, gains, taxes, and ability to catch up over the short term, it might require some selling.

capitalninja

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Re: Time to rebalance?
« Reply #2 on: January 20, 2016, 04:18:33 PM »
I would say rebalance according to the investment policy that you've outlined for yourself. I rebalance my portfolio with new investments vs. selling positions and transferring those dollars others.

I tend to buy several times per month so this works well for me.

Eric

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Re: Time to rebalance?
« Reply #3 on: January 20, 2016, 04:21:06 PM »
usually I just throw my income at whatever is lagging in my allocation, but in these current market conditions I can't keep up with fall in equities.

This is how I handle it as well.  New deposits go towards my international allocation at the moment (and have been for a while).  If it's still off +5% in a year, then I'd consider doing a "real" rebalance of selling what's up to buy what's down.  But I'm not terribly worried about it in the short term.

NorCal

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Re: Time to rebalance?
« Reply #4 on: January 20, 2016, 05:06:26 PM »
I would say rebalance according to the investment policy that you've outlined for yourself. I rebalance my portfolio with new investments vs. selling positions and transferring those dollars others.

I tend to buy several times per month so this works well for me.

+1000

Re-balancing decisions should be based on pre-defined criteria.  There are many good ways to do it, but doing it based on the "feel" of the market is a bad idea.  Here are a few re-balancing criteria I have on my various accounts:

1.  Rebalance at the end of each January.
2.  Rebalance continually by investing new funds in a way to maintain the current balance
3.  Rebalance when the account is out of balance by more than 10 percentage points.

Prchawkeye

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Re: Time to rebalance?
« Reply #5 on: January 21, 2016, 07:17:20 AM »
Thanks for the input. I think I'll wait until it drops to 10% then rebalance as I'm still in the accumulation phase.

LAGuy

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Re: Time to rebalance?
« Reply #6 on: January 21, 2016, 07:41:05 AM »
I definitely wouldn't put any money towards oil, the commodity. Even when it finally does put in a bottom, it's not going to have much upside. I'd just invest in the underlying companies stock instead.

MustacheAndaHalf

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Re: Time to rebalance?
« Reply #7 on: January 21, 2016, 12:10:08 PM »
Betting on oil is a bet against OPEC, the organization that decided to make oil prices fall.  You should have a good reason why you think oil is a better bet than stocks, as generally commodities don't outpace stocks in the long term.  Also, if it works will you abandon investing in stocks, and start speculating with more of your money until it results in a significant loss?  Even a short-term win may setup a long-term problem for your investing behavior.