Rebalance during these days of high volatility?

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thisisallen
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Rebalance during these days of high volatility?

Post by thisisallen » Mon Mar 09, 2020 3:22 pm

In my PP, 4x25, LTT is at least 15% above stocks, as of today’s closing prices. Is there any advice on whether to rebalance between the 2 immediately or wait until the volatility calms down a bit?
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I Shrugged
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Re: Rebalance during these days of high volatility?

Post by I Shrugged » Mon Mar 09, 2020 3:26 pm

I think it's a very good time to do that particular rebalance.
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KevinW
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Re: Rebalance during these days of high volatility?

Post by KevinW » Tue Mar 10, 2020 2:03 pm

IMO, just follow your normal rebalancing strategy. If that says to rebalance, do; if not, don't.
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Re: Rebalance during these days of high volatility?

Post by thisisallen » Tue Mar 10, 2020 5:36 pm

Today’s reversal (stocks up/bonds down) was enough to return the positions to normal, i.e., within the bands. So if I would not have checked my portfolio yesterday then I would have avoided any worry about rebalancing at this time. Maybe there’s a lesson in that...
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Maddy
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Re: Rebalance during these days of high volatility?

Post by Maddy » Tue Mar 10, 2020 6:17 pm

Thanks for asking this question. I was wondering about that also.
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Re: Rebalance during these days of high volatility?

Post by LittleDinghy » Wed Mar 11, 2020 12:32 am

thisisallen wrote:
Mon Mar 09, 2020 3:22 pm
In my PP, 4x25, LTT is at least 15% above stocks, as of today’s closing prices. Is there any advice on whether to rebalance between the 2 immediately or wait until the volatility calms down a bit?
My reading of The Permanent Portfolio book is that the recommended time to rebalance is when one asset is > 35% or < 15% of the whole portfolio value. Your rule of one asset 15% > than any other asset is different than the book’s recommendation. What leads you to take a different rebalancing approach than recommended in the book?
thisisallen
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Re: Rebalance during these days of high volatility?

Post by thisisallen » Wed Mar 11, 2020 9:05 am

LittleDinghy wrote:
Wed Mar 11, 2020 12:32 am
thisisallen wrote:
Mon Mar 09, 2020 3:22 pm
In my PP, 4x25, LTT is at least 15% above stocks, as of today’s closing prices. Is there any advice on whether to rebalance between the 2 immediately or wait until the volatility calms down a bit?
My reading of The Permanent Portfolio book is that the recommended time to rebalance is when one asset is > 35% or < 15% of the whole portfolio value. Your rule of one asset 15% > than any other asset is different than the book’s recommendation. What leads you to take a different rebalancing approach than recommended in the book?
In this case I had recently rebalanced so the gold and cash positions were close enough to the balance level so that the decrease in the stock position and the increase in the bond position triggered a rebalance between them. Is that correct?
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Xan
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Re: Rebalance during these days of high volatility?

Post by Xan » Wed Mar 11, 2020 9:08 am

thisisallen wrote:
Wed Mar 11, 2020 9:05 am
LittleDinghy wrote:
Wed Mar 11, 2020 12:32 am
thisisallen wrote:
Mon Mar 09, 2020 3:22 pm
In my PP, 4x25, LTT is at least 15% above stocks, as of today’s closing prices. Is there any advice on whether to rebalance between the 2 immediately or wait until the volatility calms down a bit?
My reading of The Permanent Portfolio book is that the recommended time to rebalance is when one asset is > 35% or < 15% of the whole portfolio value. Your rule of one asset 15% > than any other asset is different than the book’s recommendation. What leads you to take a different rebalancing approach than recommended in the book?
In this case I had recently rebalanced so the gold and cash positions were close enough to the balance level so that the decrease in the stock position and the increase in the bond position triggered a rebalance between them. Is that correct?
The canonical method is to rebalance the whole portfolio when one of the four quadrants reaches as high as 35% of the total portfolio value, or as low as 15% of the total portfolio value.
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Maddy
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Re: Rebalance during these days of high volatility?

Post by Maddy » Wed Mar 11, 2020 9:34 am

Xan wrote:
Wed Mar 11, 2020 9:08 am
The canonical method is to rebalance the whole portfolio when one of the four quadrants reaches as high as 35% of the total portfolio value, or as low as 15% of the total portfolio value.
So, just for the sake of clarity, if the bond quadrant has exceeded 35% but the other three quadrants are still within the 15-35 band, you'd rebalance everything to 25% rather than simply moving some bonds to cash?
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Xan
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Re: Rebalance during these days of high volatility?

Post by Xan » Wed Mar 11, 2020 9:42 am

Maddy wrote:
Wed Mar 11, 2020 9:34 am
Xan wrote:
Wed Mar 11, 2020 9:08 am
The canonical method is to rebalance the whole portfolio when one of the four quadrants reaches as high as 35% of the total portfolio value, or as low as 15% of the total portfolio value.
So, just for the sake of clarity, if the bond quadrant has exceeded 35% but the other three quadrants are still within the 15-35 band, you'd rebalance everything to 25% rather than simply moving some bonds to cash?
That's the official Harry Browne method, yes. Personally I don't think there's necessarily a wrong way to rebalance: as long as you're within the bands, you have a PP. But unless you're following a mechanical plan that you came up with ahead of time, you're gambling/market timing. Which isn't necessarily bad either; just know that's what's happening.
thisisallen
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Re: Rebalance during these days of high volatility?

Post by thisisallen » Wed Mar 11, 2020 12:43 pm

I may not be explaining it clearly but in my case all positions would have rebalanced evenly by rebalancing stocks and bonds. But the original question arose as to the utility/futility of it in these days of such great volatility - one day rebalancing is necessary, next day it is not, and so on.
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Cortopassi
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Re: Rebalance during these days of high volatility?

Post by Cortopassi » Wed Mar 11, 2020 2:05 pm

thisisallen wrote:
Wed Mar 11, 2020 12:43 pm
I may not be explaining it clearly but in my case all positions would have rebalanced evenly by rebalancing stocks and bonds. But the original question arose as to the utility/futility of it in these days of such great volatility - one day rebalancing is necessary, next day it is not, and so on.
Futility I think, as you've seen the ups and downs occasionally cancel each other out over the past few days. It feels more like timing. What worked Day 1 screwed you over on Day 2.

On the 35/15%, since I follow a variant of the PP, I use (based off 100) 140% and 60% of the original value, because I have a few oddball items (like 5% emerging market and 5% VBR and 5% silver and 10% cash)

As below:

Image
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