Gyroscopic Investing

Posted: **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?

Posted: **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.

Posted: **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.

Posted: **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?

Posted: **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.

Posted: **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.

Posted: **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.

Posted: **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.

Posted: **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.

Posted: **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,

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

Thank you.

Posted: **Sat Jul 27, 2013 2:11 pm**

Cash.

Posted: **Sat Jul 27, 2013 4:03 pm**

Cash cash cash.

Posted: **Sat Jul 27, 2013 4:10 pm**

Contribute to gold and LTTs, trying to make them both as even as possible relative to each other (ie they are the same % of your PP). If, however, adding the full $5500 to gold would still make it lower as a % of your PP than LTTs, then just contribute the entire thing to gold.

Posted: **Sat Jul 27, 2013 9:09 pm**

I like to add evenly across the four categories. This eliminates the chance of picking the wrong asset and, I believe, has been shown to yield the greatest return over time.

Posted: **Sun Jul 28, 2013 4:13 am**

Ad Orientem wrote: Cash.

dualstow wrote: Cash cash cash.

Why Cash? Isn't it market timing?

When to add to 4 categories ? By the end of the year?

Posted: **Sun Jul 28, 2013 6:28 am**

I'd just add it it to the lagging asset. That way you keep your transaction costs as low as possible by reducing the chance you have to rebalance.

Posted: **Sun Jul 28, 2013 7:58 am**

Am I wrong in thinking the 15/35% rebalancing bands is what gives the PP the ability to eliminate the danger of market timing? It doesn't make sense to change your bands percentages when adding new money. If, for example, stocks are 29%, bonds 22%, gold 21%, and cash 28% I would just add new money at the percentages to each of the assets. If you did anything different the 15/35 would be reached at a different time.

Posted: **Sun Jul 28, 2013 10:59 am**

Maybe it depends on the situation. If my gold share were down to 20%, I'd be tempted to put new money into it rather than into cash, and rather than waiting for 15%. But, with all my assets floating between, say, 23% and 27%, I'd put everything new into cash and wait for a band to be reached.

If all assets were depressed but fairly equal and I came into some new money, I'd probably buy all the assets.
Seems like common sense.

Posted: **Sun Jul 28, 2013 1:26 pm**

My actual Percent is:

St 27,52%
Lb 26,00%
Ch 26,50%
Gd 19,97%

any other opinion?

The new money represents 20% of the existing PP

Posted: **Sun Jul 28, 2013 4:17 pm**

frugal wrote: My actual Percent is:

St 27,52%
Lb 26,00%
Ch 26,50%
Gd 19,97%

any other opinion?

The new money represents 20% of the existing PP

If I was adding 20% to the PP, I would restore all assets to 4x25 given the minor drift you have in the current allocation (especially in a taxable account).

Posted: **Tue Jul 30, 2013 3:53 am**

Maybe I prefer to do 4x25 again...

Posted: **Tue Jul 30, 2013 11:31 am**

Makes sense to me.

Gyroscopic Investing

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