Top is in

[frugalnacho]

[dandarc]

10% gain coming today.  Cashed out my entire 401K yesterday and re-buying better funds today.  Noticed E-Trade now offering Schwab index funds on the no-fee list, so I got off my ass and finally fixed that account to line up with the IPS.  A little under half of our entire portfolio in cash for 1 day.  With my luck, market going up today is pretty much guaranteed.

So top is in - at close today.

Reverse jinx worked!  Funds aren't priced yet, but looking at ETFs that track same indices, I "made" about 2 weeks gross pay by having the 401K in cash today.

New plan - quit job and just find a day every other week to go to cash for.  What could possibly go wrong?

[nereo]

10% gain coming today.  Cashed out my entire 401K yesterday and re-buying better funds today.  Noticed E-Trade now offering Schwab index funds on the no-fee list, so I got off my ass and finally fixed that account to line up with the IPS.  A little under half of our entire portfolio in cash for 1 day.  With my luck, market going up today is pretty much guaranteed.

So top is in - at close today.

Reverse jinx worked!  Funds aren't priced yet, but looking at ETFs that track same indices, I "made" about 2 weeks gross pay by having the 401K in cash today.

New plan - quit job and just find a day every other week to go to cash for.  What could possibly go wrong?

I was coming here to post: Good Job - you were only off by about 14%!
Glad you made out today.
- as for what could possibily go wrong... I can't think of a thing [sarcasm/]

[sol]

Market is down 10% in a week.  Another week of this and I'm going to have to start scouring the couch cushions to find spare cash to stuff in. 

As for today, it's business as usual.  Thursday is a buying day this week like every week.  Normal amount on the normal schedule.  Yawn.

Does anyone else think the plunging stock market is related to inflation fears tires to the announcement of the new budget deal, which adds about $300m per year of new deficit spending on top of the $1500m added by the new tax bill?  I mean I know Trump calls himself "the king of debt" but this seems a little too on the nose.

[MrGreen]

Loving all the space references! Lol

[Exflyboy]

Oh but the tax cuts will spur economic growth so we will pay off the National Debt in no time.... I got a bridge for sale over here if you're interested?

I see the S&P has just dipped into correction territory today.. Anyone doing any extra buying at these levels?

I'm at 80:20 (FIRED) but I think if we hit 20% down I might roll 25% of my bond holdings into VTSAX.. I think I could go as far as 90:10 (maybe if we hit 30% down) and be OK with that asset allocation.

[hadabeardonce]

Does anyone else think the plunging stock market is related to inflation fears tires to the announcement of the new budget deal, which adds about $300m per year of new deficit spending on top of the $1500m added by the new tax bill?  I mean I know Trump calls himself "the king of debt" but this seems a little too on the nose.

I don't know enough to explain the selloff, but I know enough to stick to my current plan and continue investing for the long run.

Maybe it's just baby boomers retiring? Exodus from the market of those born around 1955? Cashing out to buy houses at low rates or bitcoin?

[Lews Therin]

Oh but the tax cuts will spur economic growth so we will pay off the National Debt in no time.... I got a bridge for sale over here if you're interested?

I see the S&P has just dipped into correction territory today.. Anyone doing any extra buying at these levels?

I'm at 80:20 (FIRED) but I think if we hit 20% down I might roll 25% of my bond holdings into VTSAX.. I think I could go as far as 90:10 (maybe if we hit 30% down) and be OK with that asset allocation.

I want to, but I already spent all my extra tuesday.... The moment I get a paycheck though....

[Tabaxus]

I got my paycheck today, so $7k went in...  I will admit that I thought pretty hard about dipping into my emergency funds and "pay taxes in April" funds to accelerate some investments into today (could have tapped about $20-30k; certainly would have the cash flow to top off my taxes before April, but would be thin on my emergency account until May or June).  Held that impulse off, probably shouldn't have, but at the end of the day, even if I pushed $20-30k in early at the bottom, would not be life-altering.  Would be more life-altering to allow something to get me off-plan.

[WhiteTrashCash]

Recently, I've started using the word "dotard" to refer to idiots, because it's kind of like "retard" only it isn't ableist. The people who are actually pulling their money out of the stock market right now because Americans are being paid more money to spend on goods and services are dotards. The people buying bitcoin are also dotards. The people investing in gold and silver are uber dotards.

I am looking forward to all the extra discounted shares I'm going to purchase. Thanks, dotards!

[dragoncar]

Market is down 10% in a week.  Another week of this and I'm going to have to start scouring the couch cushions to find spare cash to stuff in. 

As for today, it's business as usual.  Thursday is a buying day this week like every week.  Normal amount on the normal schedule.  Yawn.

Does anyone else think the plunging stock market is related to inflation fears tires to the announcement of the new budget deal, which adds about $300m per year of new deficit spending on top of the $1500m added by the new tax bill?  I mean I know Trump calls himself "the king of debt" but this seems a little too on the nose.

Wouldn't inflation drive stock prices up? 

[NoraLenderbee]

Recently, I've started using the word "dotard" to refer to idiots, because it's kind of like "retard" only it isn't ableist.

A dotard is a senile old person, so you're being ageist.

[sol]

Wouldn't inflation drive stock prices up?

The argument in the press these days is that rising inflation will cause the new Fed to raise rates, which will hurt the economy and tank stocks.

Let's keep in mind that the 7 member fed currently has four empty seats, a new anti-regulation fed chair who wants easier credit lending, and a pending nomination with a long history of prioritizing inflation over employment concerns (i.e. he's been desperate to raise rates faster for years now).  I think there is a legitimate concern that Trump's fed is going to totally blow it.  The adults have all left the room.

The market certainly seems to think so.

[facepalm]

Market is down 10% in a week.  Another week of this and I'm going to have to start scouring the couch cushions to find spare cash to stuff in. 

As for today, it's business as usual.  Thursday is a buying day this week like every week.  Normal amount on the normal schedule.  Yawn.

Does anyone else think the plunging stock market is related to inflation fears tires to the announcement of the new budget deal, which adds about $300m per year of new deficit spending on top of the $1500m added by the new tax bill?  I mean I know Trump calls himself "the king of debt" but this seems a little too on the nose.

Wouldn't inflation drive stock prices up?

There is data that suggests that growth sticks are negatively impact Ed by inflation. As are the dollars you are using to buy your stocks.

[WhiteTrashCash]

Recently, I've started using the word "dotard" to refer to idiots, because it's kind of like "retard" only it isn't ableist.

A dotard is a senile old person, so you're being ageist.

The Merriam-Webster dictionary doesn't mention anything about the dotard being old. Just senile. I know plenty of people who are senile but not old. Many of them serve in Congress.

[MrGreen]

I'm at 80:20 (FIRED) but I think if we hit 20% down I might roll 25% of my bond holdings into VTSAX.. I think I could go as far as 90:10 (maybe if we hit 30% down) and be OK with that asset allocation.

I was thinking the same thing; I'm 80:20 as well. I think I'd move to 90:10 if we see a 20% drop, and I'd consider going all in on stocks under the right circumstances. When would you bring your AA back to 80:20? Would you wait for a full recovery to the all-time high?

[dividendman]

I'm at 80:20 (FIRED) but I think if we hit 20% down I might roll 25% of my bond holdings into VTSAX.. I think I could go as far as 90:10 (maybe if we hit 30% down) and be OK with that asset allocation.

I was thinking the same thing; I'm 80:20 as well. I think I'd move to 90:10 if we see a 20% drop, and I'd consider going all in on stocks under the right circumstances. When would you bring your AA back to 80:20? Would you wait for a full recovery to the all-time high?

Hrm... market timing is probably a bad idea even if you think a 20% drop is a great time to do it. I'm going to stick with my IPS and re-balance twice a year (next time is Feb 20th) and keep my rising equity glide-path going (from 75:25 stocks:bonds to 95:5 over 10 years, 2% per year).

All of that being said it's clear that the top is in and any equity allocation is folly.

[dragoncar]

Wouldn't inflation drive stock prices up?

The argument in the press these days is that rising inflation will cause the new Fed to raise rates, which will hurt the economy and tank stocks.

Let's keep in mind that the 7 member fed currently has four empty seats, a new anti-regulation fed chair who wants easier credit lending, and a pending nomination with a long history of prioritizing inflation over employment concerns (i.e. he's been desperate to raise rates faster for years now).  I think there is a legitimate concern that Trump's fed is going to totally blow it.  The adults have all left the room.

The market certainly seems to think so.

Gee, that hasn't been clear for quite some time?

[dragoncar]

Recently, I've started using the word "dotard" to refer to idiots, because it's kind of like "retard" only it isn't ableist.

A dotard is a senile old person, so you're being ageist.

The Merriam-Webster dictionary doesn't mention anything about the dotard being old. Just senile. I know plenty of people who are senile but not old. Many of them serve in Congress.

The basic definition of senility implies old age, though

Anyways, as an idiot, I'm quite taking offense at this discussion

[Radagast]

CONGRATULATIONS THORSTACH! With a 10% decline, officially a correction, you have successfully called your first top! You called the top on:
April 11, 12, 13, 26, 28
May 9, 11, 16, 17
June 27, 29
July 1, 24, 27
August 4, 8, 18, 22
September 5
October 23
December 1
February 2
You were right! You called the top correctly in just 22 tries! With performance like that you are nearly as good as a stopped clock's hour hand, and well deserving of this certificate of achievement.
via Imgflip Meme Generator

You also get this aspirational stopped clock!
via Imgflip Meme Generator

via Imgflip Meme Generator

[JAYSLOL]

LOL. 

[MrMoneyMullet]

CONGRATULATIONS THORSTACH! With a 10% decline, officially a correction, you have successfully called your first top! You called the top on:
April 11, 12, 13, 26, 28
May 9, 11, 16, 17
June 27, 29
July 1, 24, 27
August 4, 8, 18, 22
September 5
October 23
December 1
February 2
You were right! You called the top correctly in just 22 tries! With performance like that you are nearly as good as a stopped clock's hour hand, and well deserving of this certificate of achievement.

Oh man, I laughed out loud! Nice work!

I meant to look earlier today how far the market would have to drop before even getting to the level of the first called "top" on this thread, but I was too lazy. Now that the top is in, I am finding little joy in even the most basic snarky tasks.

[MrDelane]

Radagast, well done.

:)

[bacchi]

Hahahaha. That certificate of achievement is comedy gold.

[PhilB]

Recently, I've started using the word "dotard" to refer to idiots, because it's kind of like "retard" only it isn't ableist.

A dotard is a senile old person, so you're being ageist.

The Merriam-Webster dictionary doesn't mention anything about the dotard being old. Just senile. I know plenty of people who are senile but not old. Many of them serve in Congress.

The basic definition of senility implies old age, though

Anyways, as an idiot, I'm quite taking offense at this discussion

If we're taking Merriam-Webster as authorative here and MW says dotard = senile, then it's probably worth checking how MW defines senile:

: of, relating to, exhibiting, or characteristic of old age ·senile weakness
; especially : exhibiting a loss of cognitive abilities (such as memory) associated with old age

[WhiteTrashCash]

Recently, I've started using the word "dotard" to refer to idiots, because it's kind of like "retard" only it isn't ableist.

A dotard is a senile old person, so you're being ageist.

The Merriam-Webster dictionary doesn't mention anything about the dotard being old. Just senile. I know plenty of people who are senile but not old. Many of them serve in Congress.

The basic definition of senility implies old age, though

Anyways, as an idiot, I'm quite taking offense at this discussion

If we're taking Merriam-Webster as authorative here and MW says dotard = senile, then it's probably worth checking how MW defines senile:

: of, relating to, exhibiting, or characteristic of old age ·senile weakness
; especially : exhibiting a loss of cognitive abilities (such as memory) associated with old age

Jeez, way to beat a great joke to death. I bet yer a scream at parties. "Well, actually..."

[PhilB]

Jeez, way to beat a great joke to death. I bet yer a scream at parties. "Well, actually..."

Sorry, is this some traditional US joke I'm not aware of?  Person A uses a word without knowing it's meaning, person B tells them they're wrong. Person A say no they aren't by using another word they don't know the meaning of and then we all laugh?  I'll have to watch out for that one in future.

[JG in Hangzhou]

Jeez, way to beat a great joke to death. I bet yer a scream at parties. "Well, actually..."

Sorry, is this some traditional US joke I'm not aware of?  Person A uses a word without knowing it's meaning, person B tells them they're wrong. Person A say no they aren't by using another word they don't know the meaning of and then we all laugh?  I'll have to watch out for that one in future.

Perhaps you meant to say "Is this joke an Americanism".  A traditional joke would be something like "why does the chicken cross the road?" or "knock knock... Who's there?"   but a joke that comes from some behavior pattern would be better represented by using the suffix "ism" than the word traditional...

[Brother Esau]

CONGRATULATIONS THORSTACH! With a 10% decline, officially a correction, you have successfully called your first top! You called the top on:
April 11, 12, 13, 26, 28
May 9, 11, 16, 17
June 27, 29
July 1, 24, 27
August 4, 8, 18, 22
September 5
October 23
December 1
February 2
You were right! You called the top correctly in just 22 tries! With performance like that you are nearly as good as a stopped clock's hour hand, and well deserving of this certificate of achievement.
via Imgflip Meme Generator

You also get this aspirational stopped clock!
via Imgflip Meme Generator

via Imgflip Meme Generator

[MrGreen]

I'm at 80:20 (FIRED) but I think if we hit 20% down I might roll 25% of my bond holdings into VTSAX.. I think I could go as far as 90:10 (maybe if we hit 30% down) and be OK with that asset allocation.

I was thinking the same thing; I'm 80:20 as well. I think I'd move to 90:10 if we see a 20% drop, and I'd consider going all in on stocks under the right circumstances. When would you bring your AA back to 80:20? Would you wait for a full recovery to the all-time high?

Hrm... market timing is probably a bad idea even if you think a 20% drop is a great time to do it. I'm going to stick with my IPS and re-balance twice a year (next time is Feb 20th) and keep my rising equity glide-path going (from 75:25 stocks:bonds to 95:5 over 10 years, 2% per year).

Portfolio rebalancing is the same thing, this is just a heavy handed version. Stocks drop and suddenly your 80:20 is 75:25 or something like that. You rebalance to move some bond gains back over to stocks with the anticipation that stocks will outperform bonds at some point in the future. The same happens when stocks go up and you move money into bonds when your portfolio is suddenly 85:15. It's basically "over rebalancing" with the intention of catching the the ride up of the asset class you're moving money into. If one did this for every one of the major market cycles he would outperform the traditional rebalancer. It won't be a monumental difference in the long run but it's a sure thing as long as the market keeps going up long term.

[PhilB]

Jeez, way to beat a great joke to death. I bet yer a scream at parties. "Well, actually..."

Sorry, is this some traditional US joke I'm not aware of?  Person A uses a word without knowing it's meaning, person B tells them they're wrong. Person A say no they aren't by using another word they don't know the meaning of and then we all laugh?  I'll have to watch out for that one in future.

Perhaps you meant to say "Is this joke an Americanism".  A traditional joke would be something like "why does the chicken cross the road?" or "knock knock... Who's there?"   but a joke that comes from some behavior pattern would be better represented by using the suffix "ism" than the word traditional...

Thank you JG.  I stand correctismed. :0)

[nereo]

I'm at 80:20 (FIRED) but I think if we hit 20% down I might roll 25% of my bond holdings into VTSAX.. I think I could go as far as 90:10 (maybe if we hit 30% down) and be OK with that asset allocation.

I was thinking the same thing; I'm 80:20 as well. I think I'd move to 90:10 if we see a 20% drop, and I'd consider going all in on stocks under the right circumstances. When would you bring your AA back to 80:20? Would you wait for a full recovery to the all-time high?

Hrm... market timing is probably a bad idea even if you think a 20% drop is a great time to do it. I'm going to stick with my IPS and re-balance twice a year (next time is Feb 20th) and keep my rising equity glide-path going (from 75:25 stocks:bonds to 95:5 over 10 years, 2% per year).

Portfolio rebalancing is the same thing, this is just a heavy handed version. Stocks drop and suddenly your 80:20 is 75:25 or something like that. You rebalance to move some bond gains back over to stocks with the anticipation that stocks will outperform bonds at some point in the future. The same happens when stocks go up and you move money into bonds when your portfolio is suddenly 85:15. It's basically "over rebalancing" with the intention of catching the the ride up of the asset class you're moving money into. If one did this for every one of the major market cycles he would outperform the traditional rebalancer. It won't be a monumental difference in the long run but it's a sure thing as long as the market keeps going up long term.

Done properly portfolio rebalancing is NOT market timing. For starters, the timing of rebalancing should be pre-determined (a priori) and is typically either done at a given time interval (e.g. "quarterly") or based on asset percentages (e.g. "whenever any segment of my actual AA deviates more than 2% from my target AA"). Unlike market timing where you look at a single segment (usually equities) and decide to get in or get out (add or remove cash) rebalancing involves all your investments and their relationship to each other. "Over-rebalancing" isn't really rebalancing at all, as you are then ignoring your own AA in the hopes of (in your words) 'catching the ride up' - it's market timing (stupid) on top of normal rebalancing (smart).

[GuitarStv]

I'm at 80:20 (FIRED) but I think if we hit 20% down I might roll 25% of my bond holdings into VTSAX.. I think I could go as far as 90:10 (maybe if we hit 30% down) and be OK with that asset allocation.

I was thinking the same thing; I'm 80:20 as well. I think I'd move to 90:10 if we see a 20% drop, and I'd consider going all in on stocks under the right circumstances. When would you bring your AA back to 80:20? Would you wait for a full recovery to the all-time high?

Hrm... market timing is probably a bad idea even if you think a 20% drop is a great time to do it. I'm going to stick with my IPS and re-balance twice a year (next time is Feb 20th) and keep my rising equity glide-path going (from 75:25 stocks:bonds to 95:5 over 10 years, 2% per year).

Portfolio rebalancing is the same thing, this is just a heavy handed version. Stocks drop and suddenly your 80:20 is 75:25 or something like that. You rebalance to move some bond gains back over to stocks with the anticipation that stocks will outperform bonds at some point in the future. The same happens when stocks go up and you move money into bonds when your portfolio is suddenly 85:15. It's basically "over rebalancing" with the intention of catching the the ride up of the asset class you're moving money into. If one did this for every one of the major market cycles he would outperform the traditional rebalancer. It won't be a monumental difference in the long run but it's a sure thing as long as the market keeps going up long term.

Done properly portfolio rebalancing is NOT market timing. For starters, the timing of rebalancing should be pre-determined (a priori) and is typically either done at a given time interval (e.g. "quarterly") or based on asset percentages (e.g. "whenever any segment of my actual AA deviates more than 2% from my target AA"). Unlike market timing where you look at a single segment (usually equities) and decide to get in or get out (add or remove cash) rebalancing involves all your investments and their relationship to each other. "Over-rebalancing" isn't really rebalancing at all, as you are then ignoring your own AA in the hopes of (in your words) 'catching the ride up' - it's market timing (stupid) on top of normal rebalancing (smart).

I'm not convinced there's such a thing as 'over-rebalancing'.  Your goal is to keep the AA at roughly the same levels (that's why you decided on an AA) . . . hence why you rebalance at all.  Most people don't rebalance every day simply because it's a PITA,  but if you were to do so I don't see how that would be detrimental in any way.

[ingrownstudentloans]

I'm at 80:20 (FIRED) but I think if we hit 20% down I might roll 25% of my bond holdings into VTSAX.. I think I could go as far as 90:10 (maybe if we hit 30% down) and be OK with that asset allocation.

I was thinking the same thing; I'm 80:20 as well. I think I'd move to 90:10 if we see a 20% drop, and I'd consider going all in on stocks under the right circumstances. When would you bring your AA back to 80:20? Would you wait for a full recovery to the all-time high?

Hrm... market timing is probably a bad idea even if you think a 20% drop is a great time to do it. I'm going to stick with my IPS and re-balance twice a year (next time is Feb 20th) and keep my rising equity glide-path going (from 75:25 stocks:bonds to 95:5 over 10 years, 2% per year).

Portfolio rebalancing is the same thing, this is just a heavy handed version. Stocks drop and suddenly your 80:20 is 75:25 or something like that. You rebalance to move some bond gains back over to stocks with the anticipation that stocks will outperform bonds at some point in the future. The same happens when stocks go up and you move money into bonds when your portfolio is suddenly 85:15. It's basically "over rebalancing" with the intention of catching the the ride up of the asset class you're moving money into. If one did this for every one of the major market cycles he would outperform the traditional rebalancer. It won't be a monumental difference in the long run but it's a sure thing as long as the market keeps going up long term.

Done properly portfolio rebalancing is NOT market timing. For starters, the timing of rebalancing should be pre-determined (a priori) and is typically either done at a given time interval (e.g. "quarterly") or based on asset percentages (e.g. "whenever any segment of my actual AA deviates more than 2% from my target AA"). Unlike market timing where you look at a single segment (usually equities) and decide to get in or get out (add or remove cash) rebalancing involves all your investments and their relationship to each other. "Over-rebalancing" isn't really rebalancing at all, as you are then ignoring your own AA in the hopes of (in your words) 'catching the ride up' - it's market timing (stupid) on top of normal rebalancing (smart).

I'm not convinced there's such a thing as 'over-rebalancing'.  Your goal is to keep the AA at roughly the same levels (that's why you decided on an AA) . . . hence why you rebalance at all.  Most people don't rebalance every day simply because it's a PITA,  but if you were to do so I don't see how that would be detrimental in any way.

I agree to an extent, but I do think you miss out on momentum in the market and some of the inherent protections of the approach. 

If your 80/20 target swings to 81/19 in a given day because stocks (the assumed 80 in this example) are on the start of a run, you would miss out on the compounding of that run for however long it lasts.  On the other side, you would be throwing money into a falling knife scenario and loosing the protection of the balanced approach.  If market drops 5% in a day so you take your bond monies and put them into stock monies, and it drops another 5% the next day, you are in a worse position than you would have otherwise been had you kept a normal schedule.

I say do what makes you happy/comfortable.  I am set up for quarterly rebalancing because that works for me. 

[PathtoFIRE]

When I frequented Bogleheads more, I seem to remember the general consensus was that rebalancing too often could hurt you. A quick google search only turned up this
https://www.bogleheads.org/wiki/Rebalancing which has a cited source at the bottom linking to some research suggesting the optimal rebalancing strategy (tl;dr check often but have large deviation standards before triggering a rebalance)

[2Birds1Stone]

I'm at 80:20 (FIRED) but I think if we hit 20% down I might roll 25% of my bond holdings into VTSAX.. I think I could go as far as 90:10 (maybe if we hit 30% down) and be OK with that asset allocation.

I was thinking the same thing; I'm 80:20 as well. I think I'd move to 90:10 if we see a 20% drop, and I'd consider going all in on stocks under the right circumstances. When would you bring your AA back to 80:20? Would you wait for a full recovery to the all-time high?

Hrm... market timing is probably a bad idea even if you think a 20% drop is a great time to do it. I'm going to stick with my IPS and re-balance twice a year (next time is Feb 20th) and keep my rising equity glide-path going (from 75:25 stocks:bonds to 95:5 over 10 years, 2% per year).

Portfolio rebalancing is the same thing, this is just a heavy handed version. Stocks drop and suddenly your 80:20 is 75:25 or something like that. You rebalance to move some bond gains back over to stocks with the anticipation that stocks will outperform bonds at some point in the future. The same happens when stocks go up and you move money into bonds when your portfolio is suddenly 85:15. It's basically "over rebalancing" with the intention of catching the the ride up of the asset class you're moving money into. If one did this for every one of the major market cycles he would outperform the traditional rebalancer. It won't be a monumental difference in the long run but it's a sure thing as long as the market keeps going up long term.

Depends.

I can see it working during normal market gyrations, but over-rebalancing during a longer bear market could have you catching a falling knife all the way down to 100% Stock, at which point you will need to keep riding the wave, regardless of direction. If you rebalance on certain dates, you at least have a better shot at riding out volatility over a multi year period. 

[nereo]

I'm at 80:20 (FIRED) but I think if we hit 20% down I might roll 25% of my bond holdings into VTSAX.. I think I could go as far as 90:10 (maybe if we hit 30% down) and be OK with that asset allocation.

I was thinking the same thing; I'm 80:20 as well. I think I'd move to 90:10 if we see a 20% drop, and I'd consider going all in on stocks under the right circumstances. When would you bring your AA back to 80:20? Would you wait for a full recovery to the all-time high?

Hrm... market timing is probably a bad idea even if you think a 20% drop is a great time to do it. I'm going to stick with my IPS and re-balance twice a year (next time is Feb 20th) and keep my rising equity glide-path going (from 75:25 stocks:bonds to 95:5 over 10 years, 2% per year).

Portfolio rebalancing is the same thing, this is just a heavy handed version. Stocks drop and suddenly your 80:20 is 75:25 or something like that. You rebalance to move some bond gains back over to stocks with the anticipation that stocks will outperform bonds at some point in the future. The same happens when stocks go up and you move money into bonds when your portfolio is suddenly 85:15. It's basically "over rebalancing" with the intention of catching the the ride up of the asset class you're moving money into. If one did this for every one of the major market cycles he would outperform the traditional rebalancer. It won't be a monumental difference in the long run but it's a sure thing as long as the market keeps going up long term.

Done properly portfolio rebalancing is NOT market timing. For starters, the timing of rebalancing should be pre-determined (a priori) and is typically either done at a given time interval (e.g. "quarterly") or based on asset percentages (e.g. "whenever any segment of my actual AA deviates more than 2% from my target AA"). Unlike market timing where you look at a single segment (usually equities) and decide to get in or get out (add or remove cash) rebalancing involves all your investments and their relationship to each other. "Over-rebalancing" isn't really rebalancing at all, as you are then ignoring your own AA in the hopes of (in your words) 'catching the ride up' - it's market timing (stupid) on top of normal rebalancing (smart).

I'm not convinced there's such a thing as 'over-rebalancing'.  Your goal is to keep the AA at roughly the same levels (that's why you decided on an AA) . . . hence why you rebalance at all.  Most people don't rebalance every day simply because it's a PITA,  but if you were to do so I don't see how that would be detrimental in any way.

I agree to an extent, but I do think you miss out on momentum in the market and some of the inherent protections of the approach. 

If your 80/20 target swings to 81/19 in a given day because stocks (the assumed 80 in this example) are on the start of a run, you would miss out on the compounding of that run for however long it lasts.  On the other side, you would be throwing money into a falling knife scenario and loosing the protection of the balanced approach.  If market drops 5% in a day so you take your bond monies and put them into stock monies, and it drops another 5% the next day, you are in a worse position than you would have otherwise been had you kept a normal schedule.

I say do what makes you happy/comfortable.  I am set up for quarterly rebalancing because that works for me.

This is why you set your rebalancing strategy a priori.  People basically use two methods, either periodically (based on time) or divergence from target AA (based on % drift). I think it would be foolish to set either of those too high ('weekly' or 'anytime my portfolio changes >0.5% from my AA) - for one thing it could trigger unnecessary fees for buying/selling as well as STCG taxes, not to mention being a PITA with little positive gain for it.

The broader point I was making was that "over-balancing" in the context being used wasn't about the frequency of rebalancing but the degree of correction, and that is market timing.  If you need to correct (increase) your equities portion by 5% to meet your target AA of 80/20 - you don't look at what the market is doing and say "gee, I'll just go to 85/15 because I think the market is going to keep falling.  That becomes market timing. 
You rebalance, you wait for your pre-described trigger to rebalance again.  You don't try to guess where the market will be months from now and set your AA accordingly.

[mathlete]

God bless this thread.

[MrGreen]

I'm at 80:20 (FIRED) but I think if we hit 20% down I might roll 25% of my bond holdings into VTSAX.. I think I could go as far as 90:10 (maybe if we hit 30% down) and be OK with that asset allocation.

I was thinking the same thing; I'm 80:20 as well. I think I'd move to 90:10 if we see a 20% drop, and I'd consider going all in on stocks under the right circumstances. When would you bring your AA back to 80:20? Would you wait for a full recovery to the all-time high?

Hrm... market timing is probably a bad idea even if you think a 20% drop is a great time to do it. I'm going to stick with my IPS and re-balance twice a year (next time is Feb 20th) and keep my rising equity glide-path going (from 75:25 stocks:bonds to 95:5 over 10 years, 2% per year).

Portfolio rebalancing is the same thing, this is just a heavy handed version. Stocks drop and suddenly your 80:20 is 75:25 or something like that. You rebalance to move some bond gains back over to stocks with the anticipation that stocks will outperform bonds at some point in the future. The same happens when stocks go up and you move money into bonds when your portfolio is suddenly 85:15. It's basically "over rebalancing" with the intention of catching the the ride up of the asset class you're moving money into. If one did this for every one of the major market cycles he would outperform the traditional rebalancer. It won't be a monumental difference in the long run but it's a sure thing as long as the market keeps going up long term.

Done properly portfolio rebalancing is NOT market timing. For starters, the timing of rebalancing should be pre-determined (a priori) and is typically either done at a given time interval (e.g. "quarterly") or based on asset percentages (e.g. "whenever any segment of my actual AA deviates more than 2% from my target AA"). Unlike market timing where you look at a single segment (usually equities) and decide to get in or get out (add or remove cash) rebalancing involves all your investments and their relationship to each other. "Over-rebalancing" isn't really rebalancing at all, as you are then ignoring your own AA in the hopes of (in your words) 'catching the ride up' - it's market timing (stupid) on top of normal rebalancing (smart).

I'm not convinced there's such a thing as 'over-rebalancing'.  Your goal is to keep the AA at roughly the same levels (that's why you decided on an AA) . . . hence why you rebalance at all.  Most people don't rebalance every day simply because it's a PITA,  but if you were to do so I don't see how that would be detrimental in any way.

I agree to an extent, but I do think you miss out on momentum in the market and some of the inherent protections of the approach. 

If your 80/20 target swings to 81/19 in a given day because stocks (the assumed 80 in this example) are on the start of a run, you would miss out on the compounding of that run for however long it lasts.  On the other side, you would be throwing money into a falling knife scenario and loosing the protection of the balanced approach.  If market drops 5% in a day so you take your bond monies and put them into stock monies, and it drops another 5% the next day, you are in a worse position than you would have otherwise been had you kept a normal schedule.

I say do what makes you happy/comfortable.  I am set up for quarterly rebalancing because that works for me.

This is why you set your rebalancing strategy a priori.  People basically use two methods, either periodically (based on time) or divergence from target AA (based on % drift). I think it would be foolish to set either of those too high ('weekly' or 'anytime my portfolio changes >0.5% from my AA) - for one thing it could trigger unnecessary fees for buying/selling as well as STCG taxes, not to mention being a PITA with little positive gain for it.

The broader point I was making was that "over-balancing" in the context being used wasn't about the frequency of rebalancing but the degree of correction, and that is market timing.  If you need to correct (increase) your equities portion by 5% to meet your target AA of 80/20 - you don't look at what the market is doing and say "gee, I'll just go to 85/15 because I think the market is going to keep falling.  That becomes market timing. 
You rebalance, you wait for your pre-described trigger to rebalance again.  You don't try to guess where the market will be months from now and set your AA accordingly.

The effect is the same. Rebalancing is shifting funds from the stronger asset class to the weaker one. Just because you've picked a set time to do it does not change the effect. There is no guessing involved. I'm not sure where you inferred that. Also, to clarify, I wasn't talking about changing an AA based on the degree of correction in the absence of rebalancing. I already rebalance periodically (every 6-12 months when I think about it). This is in addition to that.

[OurTown]

There is an endless debate over whether the rebalancing bonus is real or not.  I suspect it depends on what you do and how often you do it, and I further suspect it is relatively small (although that doesn't stop me from rebalancing!).  Obviously, target date funds rebalance every day.  So theoretically they should benefit from the rebalancing bonus writ large.

The opposite argument is that rebalancing misses out on momentum.  That may be true, but I have never understood "momentum," so I don't try to do it. 

To the extent I engage in market timing disguised as rebalancing, it's really just nibbling around the edges.  As in I will do a 1% or 2% move during a correction (like right now), but I won't go from say a 60/40 allocation to a 90/10.   

[dougules]

CONGRATULATIONS THORSTACH! With a 10% decline, officially a correction, you have successfully called your first top! You called the top on:
April 11, 12, 13, 26, 28
May 9, 11, 16, 17
June 27, 29
July 1, 24, 27
August 4, 8, 18, 22
September 5
October 23
December 1
February 2
You were right! You called the top correctly in just 22 tries! With performance like that you are nearly as good as a stopped clock's hour hand, and well deserving of this certificate of achievement.
via Imgflip Meme Generator

You also get this aspirational stopped clock!
via Imgflip Meme Generator

via Imgflip Meme Generator

Not even, really.  thorstach "called" it on Feb 2, and the actual top was on Jan 26.  It's a lot easier to "call" a top if you wait a week. 

There is an endless debate over whether the rebalancing bonus is real or not.  I suspect it depends on what you do and how often you do it, and I further suspect it is relatively small (although that doesn't stop me from rebalancing!).  Obviously, target date funds rebalance every day.  So theoretically they should benefit from the rebalancing bonus writ large.

The opposite argument is that rebalancing misses out on momentum.  That may be true, but I have never understood "momentum," so I don't try to do it. 

To the extent I engage in market timing disguised as rebalancing, it's really just nibbling around the edges.  As in I will do a 1% or 2% move during a correction (like right now), but I won't go from say a 60/40 allocation to a 90/10.   

Whether or not you think rebalancing to preset proportions is good math, I don't think it's really a huge difference.  The big thing to me is if it helps you psychologically to avoid something more rash, it's probably worth it. 

[Stache-O-Lantern]

The top of the market is in and has been in since before i started the thread. The top being the march 1st all time high which remains unbroken.

But will the market even fall all the way to the point Thorstache originally called the top?

On March 1st 2017, the SP500 closed at about 2396.  At the moment it's at about 2536.  Needs to fall about another 5.5% to get there.

[starguru]

CONGRATULATIONS THORSTACH! With a 10% decline, officially a correction, you have successfully called your first top! You called the top on:
April 11, 12, 13, 26, 28
May 9, 11, 16, 17
June 27, 29
July 1, 24, 27
August 4, 8, 18, 22
September 5
October 23
December 1
February 2
You were right! You called the top correctly in just 22 tries! With performance like that you are nearly as good as a stopped clock's hour hand, and well deserving of this certificate of achievement.
via Imgflip Meme Generator

You also get this aspirational stopped clock!
via Imgflip Meme Generator

via Imgflip Meme Generator

I've been laughing at this for 10 minutes.  It's perfect.  It's one of the best posts I've ever seen on this forumn.

[dragoncar]

Jeez, way to beat a great joke to death. I bet yer a scream at parties. "Well, actually..."

Sorry, is this some traditional US joke I'm not aware of?  Person A uses a word without knowing it's meaning, person B tells them they're wrong. Person A say no they aren't by using another word they don't know the meaning of and then we all laugh?  I'll have to watch out for that one in future.

It’s kinda a meta joke- WTC is senile so he keeps forgetting what words mean

[JAYSLOL]

The top of the market is in and has been in since before i started the thread. The top being the march 1st all time high which remains unbroken.

But will the market even fall all the way to the point Thorstache originally called the top?

On March 1st 2017, the SP500 closed at about 2396.  At the moment it's at about 2536.  Needs to fall about another 5.5% to get there.

In fairness, he called "the top" more than a month later, so i don't think its fair to give him any credit if we get to March 1 level, its got to go below his call on April 11 levels before i start handing out sarcastic certificates of achievement :)

[poppydog]

God bless this thread.

+1. Helps to keep a sense of humour amongst the turmoil.  Great stuff.

[Exflyboy]

The funny thing to me is, I don't even remember the 2016 correction of 13.3%.. I vaguely remember the almost 20% correction in 2011.

[boarder42]

The funny thing to me is, I don't even remember the 2016 correction of 13.3%.. I vaguely remember the almost 20% correction in 2011.

Only reason I remember is I got lucky with some market timing in 16 bc we were buying a house and I sold all my taxable in case or first house didn't sell in time and got lucky with dumping it back in at the bottom

[aspiringnomad]

The funny thing to me is, I don't even remember the 2016 correction of 13.3%.. I vaguely remember the almost 20% correction in 2011.

Only reason I remember is I got lucky with some market timing in 16 bc we were buying a house and I sold all my taxable in case or first house didn't sell in time and got lucky with dumping it back in at the bottom

I'm reminded of the early 2016 correction by the only red numbers in my NW column (started tracking in late 2014). Unless there's a massive market rebound, they'll have some company when I update at the end of this month.

[2Birds1Stone]

The funny thing to me is, I don't even remember the 2016 correction of 13.3%.. I vaguely remember the almost 20% correction in 2011.

Only reason I remember is I got lucky with some market timing in 16 bc we were buying a house and I sold all my taxable in case or first house didn't sell in time and got lucky with dumping it back in at the bottom

I'm reminded of the early 2016 correction by the only red numbers in my NW column (started tracking in late 2014). Unless there's a massive market rebound, they'll have some company when I update at the end of this month.

I'm in the same boat! Started tracking NW in 2012 and I think my only month with a drop in NW was early 2016.

I won't be able to outsave my way out of this one =/