Adding money to PP

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foglifter
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Adding money to PP

Post by foglifter » Fri Jun 14, 2013 1:43 pm

I'm about to make our Roth contributions for 2013. I really wanted to put this money into my PP rather than VP, but I'm nowhere close to the rebalancing bands with 29% in stocks and the rest almost evenly split over the other 3 buckets. Event the recent drop in gold prices simply moved my gold position from 29% down to 24% - with no significant changes in the other 3 assets.

I know this question is being asked on the forum from time to time and one of the suggestions is to put the new money into cash or the most lagging asset and wait for the rebalancing time. While this sounds like a good suggestion, my concern is that the rebalancing time may not come in the foreseeable future as the uncertainty seems to be prevailing and we don't see any significant moves in any asset (except the recent drop in gold) and so my money would be just sitting there.

Any thoughts?
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buddtholomew
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Re: Adding money to PP

Post by buddtholomew » Fri Jun 14, 2013 2:37 pm

I too am in a similar position. When a rebalancing band is triggered, do you intend to rebalance the portfolio with additional cash or restore the allocation by selling the asset that appreciated beyond 35%? If the latter, I would contribute proportionally to all assets now. For me, its the former, so I will wait until a rebalancing band is triggered and contribute to the lagging asset.
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foglifter
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Re: Adding money to PP

Post by foglifter » Fri Jun 14, 2013 2:54 pm

buddtholomew wrote: I too am in a similar position. When a rebalancing band is triggered, do you intend to rebalance the portfolio with additional cash or restore the allocation by selling the asset that appreciated beyond 35%? If the latter, I would contribute proportionally to all assets now. For me, its the former, so I will wait until a rebalancing band is triggered and contribute to the lagging asset.
The former would be my preferred course of action too, although I can't exclude a possibility of the latter - e.g. if the bands are triggered due to a market move and I don't have free cash to add to my PP.
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Re: Adding money to PP

Post by AdamA » Fri Jun 14, 2013 3:28 pm

foglifter wrote: I'm about to make our Roth contributions for 2013. I really wanted to put this money into my PP rather than VP, but I'm nowhere close to the rebalancing bands with 29% in stocks and the rest almost evenly split over the other 3 buckets. Event the recent drop in gold prices simply moved my gold position from 29% down to 24% - with no significant changes in the other 3 assets.

I know this question is being asked on the forum from time to time and one of the suggestions is to put the new money into cash or the most lagging asset and wait for the rebalancing time. While this sounds like a good suggestion, my concern is that the rebalancing time may not come in the foreseeable future as the uncertainty seems to be prevailing and we don't see any significant moves in any asset (except the recent drop in gold) and so my money would be just sitting there.

Any thoughts?
Why not just cash?
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Re: Adding money to PP

Post by pugchief » Fri Jun 14, 2013 3:52 pm

My thought would be to divide the new $ in thirds and add to all buckets except stocks.
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foglifter
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Re: Adding money to PP

Post by foglifter » Fri Jun 14, 2013 4:04 pm

AdamA wrote:
foglifter wrote: I'm about to make our Roth contributions for 2013. I really wanted to put this money into my PP rather than VP, but I'm nowhere close to the rebalancing bands with 29% in stocks and the rest almost evenly split over the other 3 buckets. Event the recent drop in gold prices simply moved my gold position from 29% down to 24% - with no significant changes in the other 3 assets.

I know this question is being asked on the forum from time to time and one of the suggestions is to put the new money into cash or the most lagging asset and wait for the rebalancing time. While this sounds like a good suggestion, my concern is that the rebalancing time may not come in the foreseeable future as the uncertainty seems to be prevailing and we don't see any significant moves in any asset (except the recent drop in gold) and so my money would be just sitting there.

Any thoughts?
Why not just cash?
I just feel like I wont the money to do something rather than slowly rotting in cash. Although if we end up in deflation the cash will be the king.
"Let every man divide his money into three parts, and invest a third in land, a third in business, and a third let him keep in reserve."
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AdamA
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Re: Adding money to PP

Post by AdamA » Fri Jun 14, 2013 5:19 pm

foglifter wrote:
AdamA wrote:
foglifter wrote: I'm about to make our Roth contributions for 2013. I really wanted to put this money into my PP rather than VP, but I'm nowhere close to the rebalancing bands with 29% in stocks and the rest almost evenly split over the other 3 buckets. Event the recent drop in gold prices simply moved my gold position from 29% down to 24% - with no significant changes in the other 3 assets.

I know this question is being asked on the forum from time to time and one of the suggestions is to put the new money into cash or the most lagging asset and wait for the rebalancing time. While this sounds like a good suggestion, my concern is that the rebalancing time may not come in the foreseeable future as the uncertainty seems to be prevailing and we don't see any significant moves in any asset (except the recent drop in gold) and so my money would be just sitting there.

Any thoughts?
Why not just cash?
I just feel like I wont the money to do something rather than slowly rotting in cash. Although if we end up in deflation the cash will be the king.
You could buy some I and or EE bonds, if you already have some normal cash saved up.
"All men's miseries derive from not being able to sit in a quiet room alone."

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Re: Adding money to PP

Post by Pet Hog » Fri Jun 14, 2013 6:19 pm

For a Roth contribution of $5000, I would put 29% ($1450) in stocks, 24% ($1200) in gold, and 23.5% ($1175) each in bonds and cash.  That way the relative amounts of each asset would remain unchanged before and after your contribution, and you would not be making an emotional decision about (partial) rebalancing.  I believe you should let only the mechanical rules of the portfolio tell you when to rebalance.
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foglifter
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Re: Adding money to PP

Post by foglifter » Fri Jun 14, 2013 8:17 pm

Pet Hog wrote: For a Roth contribution of $5000, I would put 29% ($1450) in stocks, 24% ($1200) in gold, and 23.5% ($1175) each in bonds and cash.  That way the relative amounts of each asset would remain unchanged before and after your contribution, and you would not be making an emotional decision about (partial) rebalancing.  I believe you should let only the mechanical rules of the portfolio tell you when to rebalance.
The limit has been raised actually to $5500 as of this year. Well, the amount is not that big to justify the transaction fees for gold ETFs. I have enough paper gold and intend to increase my physical gold position when the rebalancing time comes.
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Re: Adding money to PP

Post by sophie » Sun Jun 16, 2013 7:15 pm

Amazing how you can tie yourself up in knots over something as simple as a Roth contribution.

You have 3 choices, all good:
1) Add the money to cash and wait to get to a rebalancing band.
2) Buy the lagging asset(s) - I would guess gold and bonds mainly.  You could calculate by pretending to add $500 to gold, recalculate percentages, the repeat the process with whatever turns out to be the laggard.
3) Divide the $$ by 4 and buy that amount of each asset.  Historically, this performs better than the other two options, but it's not enough to get into a sweat about (~1% CAGR).

Whichever you pick, make it a mechanical decision and then just do it...best not to fiddle around and end up trying to time the markets.
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Re: Adding money to PP

Post by frugal » Sat Jul 27, 2013 2:45 am

sophie wrote: Amazing how you can tie yourself up in knots over something as simple as a Roth contribution.

You have 3 choices, all good:
1) Add the money to cash and wait to get to a rebalancing band.
2) Buy the lagging asset(s) - I would guess gold and bonds mainly.  You could calculate by pretending to add $500 to gold, recalculate percentages, the repeat the process with whatever turns out to be the laggard.
3) Divide the $$ by 4 and buy that amount of each asset.  Historically, this performs better than the other two options, but it's not enough to get into a sweat about (~1% CAGR).

Whichever you pick, make it a mechanical decision and then just do it...best not to fiddle around and end up trying to time the markets.
Hello, 8)

can you please comment: http://gyroscopicinvesting.com/forum/pe ... /#msg73420

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Re: Adding money to PP

Post by Ad Orientem » Sat Jul 27, 2013 2:11 pm

Cash.
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