Gyroscopic Investing

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?

I think it's a very good time to do that particular rebalance.

IMO, just follow your normal rebalancing strategy. If that says to rebalance, do; if not, don't.

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...

Thanks for asking this question. I was wondering about that also.

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?

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?

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.

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?

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.

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.

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:

Not sure about market timing aspect. That’s why I started the conversation to ask for some help with this. HB encouraged investors not to pay a lot of attention to their PP because it is not necessary. However he said that if you happen to find out from the news or a friend, etc that a big event could have significantly altered your portfolio then it is worth checking in on it. So I assume that if you check and find that a rebalance is required then you should perform it. Yes?

Ahh, so the question was if you had looked at the right time, it would have been a rebalancing event. Sorry.

In that case, since I look all the time, still, I would have rebalanced.

Now if I was away from the computer for a day or two and come back to it, I would likely not look at stuff historically (meaning a couple days) to see if an event happened.

So, in my case, if the rebalance was triggered at 10AM, and I was in a meeting and by 11AM it wasn't being triggered, I would not rebalance until I saw it in real time, or after the market closed. Since some of my holdings are mutual funds in a 401k, I should probably hold off on deciding until those are priced later in the day.

The stock % is based on last night's close. After today closes, I'm thinking I'll be rebalancing cash -> stocks. A little nervous though. Seems like another -5% day tomorrow could be likely.

Everyone just has to find the right balance for them.

If you're checking constantly and want to use a hair-trigger to rebalance, that's fine but certainly not required.

Some people may only check their accounts a few times a year and will miss short periods of extreme volatility, and that's fine too.

Personally I just keep an eye on the markets enough to know whether something is going on and if there is, then I'll check my spreadsheet to see how close I'm getting to my bands. If I'm within about 3% or so I'll start to pay closer attention and I'll make a tentative transaction plan. If things progress to within about 1% or less of a band I'll go ahead and pull the trigger if I'm comfortable with that. Or I might wait a few days to see how things pan out. Or I might spread my transactions out a little.

However, I will admit that I have missed a few good opportunities because I waited for that last 1%. So while sometimes it's good to be mechanical and disciplined about things, it doesn't always work in your favor.

Wow. Even gold and long bonds haven't been spared recently.

The only thing holding steady is good ol' cash.

Gonna go make fondle my T-bills. BRB.

Smith1776 wrote: ↑Thu Mar 12, 2020 3:05 pm Wow. Even gold and long bonds haven't been spared recently.

The only thing holding steady is good ol' cash.

Noticed that! I recall there was a similar stretch in 2008.

After yesterday, looks even more like I should rebalance Cash -> Stocks. I have limited mobility due to 401k restrictions, so that's all the rebalancing I can really do. The investments are mutual funds, so I think I have until the end of the day to decide.

Still haven’t pulled the trigger on the above. Thinking of doing so before EOD but still a bit apprehensive. Anyone else rebalancing into stocks?

Jack Jones wrote: ↑Wed Mar 18, 2020 11:20 am Still haven’t pulled the trigger on the above. Thinking of doing so before EOD but still a bit apprehensive. Anyone else rebalancing into stocks?

Do you think the stock market is near the bottom? I don't see how it doesn't continue to slide for at least the next couple of months.

turbo8214 wrote: ↑Wed Mar 18, 2020 12:07 pm

Jack Jones wrote: ↑Wed Mar 18, 2020 11:20 am Still haven’t pulled the trigger on the above. Thinking of doing so before EOD but still a bit apprehensive. Anyone else rebalancing into stocks?

Do you think the stock market is near the bottom? I don't see how it doesn't continue to slide for at least the next couple of months.

Thinking about doing a pmward partial rebalance before closing today. Maybe 1/4 back up to my normal stock allocation. Yeah, stocks could keep going down but it's really hard to call the bottom. All we can say for sure is that money invested today will buy a lot more shares than it would have a couple of weeks ago.

barrett wrote: ↑Wed Mar 18, 2020 12:49 pm Thinking about doing a pmward partial rebalance before closing today. Maybe 1/4 back up to my normal stock allocation. Yeah, stocks could keep going down but it's really hard to call the bottom. All we can say for sure is that money invested today will buy a lot more shares than it would have a couple of weeks ago.

That is true! Although shares might be significantly expensive in two weeks or two months. It may be best to slowly DCA in.

Yes and remember that bottoms happen when things look the worst. The market tends to sniff out the recovery and start going back up long before any info or data actually shows it. So that's why a DCA rebalance is great if you're too nervous to pull the full trigger. We may be closer to the bottom than any of us think. Hell, today could be the bottom. Then again, we could still be a ways from the bottom. This is a crazy market right now. I'm sure of one thing, that this is a good price to buy stocks at long term, bottom or not.

Did a Cash -> Stocks partial rebalance. Just enough to get the portfolio back within the bands.