Reallocation Bands

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Ad Orientem
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Re: Reallocation Bands

Post by Ad Orientem » Sat Jul 06, 2013 1:59 am

frugal wrote:
Ad Orientem wrote:
frugal wrote: But if we do it yearly at the same day each year, the end result after several years, will be the same.

Correct?
Probably not. The 15/35% rebalancing bands serve a couple of purposes. First they give room for the asset that is hot (currently that's stocks) to run. And secondly it keeps you from rebalancing too frequently and generating unnecessary tax bills.

That's not to say you can't rebalance annually. Some people do. It is a more conservative approach that will reduce your volatility, but also your potential gains. And you will likely pay more in taxes over the long run.
I'm still in the middle of the book...

So, the day after 15 or 35% bands have been reached we immediatly make the REBALANCEMENT of the assets?


thanks
That's the idea. Don't get silly about it though. If your wife is in labor or your on a cruise you can wait a couple days. But yeah, once you hit the rebalancing bands you want to hit the reset button as soon as you can conveniently take care of it.
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Re: Reallocation Bands

Post by frugal » Sat Jul 06, 2013 3:45 pm

Ad Orientem wrote:
frugal wrote:
Ad Orientem wrote: Probably not. The 15/35% rebalancing bands serve a couple of purposes. First they give room for the asset that is hot (currently that's stocks) to run. And secondly it keeps you from rebalancing too frequently and generating unnecessary tax bills.

That's not to say you can't rebalance annually. Some people do. It is a more conservative approach that will reduce your volatility, but also your potential gains. And you will likely pay more in taxes over the long run.
I'm still in the middle of the book...

So, the day after 15 or 35% bands have been reached we immediatly make the REBALANCEMENT of the assets?


thanks
That's the idea. Don't get silly about it though. If your wife is in labor or your on a cruise you can wait a couple days. But yeah, once you hit the rebalancing bands you want to hit the reset button as soon as you can conveniently take care of it.
One more doubt that I would like to know how you do it:

- if you have a 100k PP

- and you have new 10k to add

- it is time to rebalance, but 2,5k to each asset is not so much ...


How do you proceed?

1) Rebalance and then add?

2) Or just add to to make it all 25%


:-\
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Re: Reallocation Bands

Post by Pointedstick » Sat Jul 06, 2013 3:58 pm

frugal wrote: One more doubt that I would like to know how you do it:

- if you have a 100k PP
- and you have new 10k to add
- it is time to rebalance, but 2,5k to each asset is not so much ...

How do you proceed?

1) Rebalance and then add?
2) Or just add to to make it all 25%

:-\
Just do whatever makes you most comfortable. There's not gonna be a test or anything.  ;)
Human behavior is economic behavior. The particulars may vary, but competition for limited resources remains a constant.
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Re: Reallocation Bands

Post by Ad Orientem » Sat Jul 06, 2013 5:13 pm

Pointedstick wrote:
frugal wrote: One more doubt that I would like to know how you do it:

- if you have a 100k PP
- and you have new 10k to add
- it is time to rebalance, but 2,5k to each asset is not so much ...

How do you proceed?

1) Rebalance and then add?
2) Or just add to to make it all 25%

:-\
Just do whatever makes you most comfortable. There's not gonna be a test or anything.  ;)
+1
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Re: Reallocation Bands

Post by Pet Hog » Sat Jul 06, 2013 7:55 pm

frugal wrote: One more doubt that I would like to know how you do it:

- if you have a 100k PP
- and you have new 10k to add
- it is time to rebalance, but 2,5k to each asset is not so much ...

How do you proceed?

1) Rebalance and then add?
2) Or just add to to make it all 25%

:-\
There's no difference between the two: you'll end up with the same dollar amount [($100,000 + $10,000)/4 = $27,500] and same number of shares/bonds/ounces of gold regardless of the path you follow.  Except that rebalance-then-add might require eight trades, while just-add-it-to-25% would require at most four trades. So to keep costs down, I would do the latter.
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Re: Reallocation Bands

Post by frugal » Sun Jul 07, 2013 2:20 am

Hello all,

in my case and if gold continues the looser than I will just add some money to gold to put it near 25%.

Pet Hog is correct at the end what I was saying is the same.

I started in January 2013 with the EU-PP, and only add more money to GOLD is not so confortable, but I don't know where to put the money!?

Please advice.


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Re: Reallocation Bands

Post by Kriegsspiel » Sun Jul 07, 2013 12:34 pm

frugal wrote: in my case and if gold continues the looser than I will just add some money to gold to put it near 25%.

I started in January 2013 with the EU-PP, and only add more money to GOLD is not so confortable, but I don't know where to put the money!?
I began by rebalancing with new contributions (adding to the lagging asset), but recently switched to equal contributions to all 4 asset classes. This way, I hope, I will hit rebalancing bands and lock in gains/harvest volatility. As it happens, my monthly contributions don't really change the %s of my assets very much.
I hated all the things I had toiled for under the sun, because I must leave them to the one who comes after me. Who knows whether that person will be wise or foolish? Yet they will have control over all the fruit of my toil into which I have poured my effort and skill under the sun. . . Nothing is better for a man than to eat and drink and enjoy his work.
- Ecclesiastes
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Re: Reallocation Bands

Post by frugal » Sun Jul 07, 2013 4:21 pm

Kriegsspiel wrote:
frugal wrote: in my case and if gold continues the looser than I will just add some money to gold to put it near 25%.

I started in January 2013 with the EU-PP, and only add more money to GOLD is not so confortable, but I don't know where to put the money!?
I began by rebalancing with new contributions (adding to the lagging asset), but recently switched to equal contributions to all 4 asset classes. This way, I hope, I will hit rebalancing bands and lock in gains/harvest volatility. As it happens, my monthly contributions don't really change the %s of my assets very much.
Hi,

how do you add to your 4 assets every month?

Isn't it expensive?

I was talking about doing it annually or when bands are touched...
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Re: Reallocation Bands

Post by Kriegsspiel » Sun Jul 07, 2013 9:23 pm

frugal wrote: I began by rebalancing with new contributions (adding to the lagging asset), but recently switched to equal contributions to all 4 asset classes. This way, I hope, I will hit rebalancing bands and lock in gains/harvest volatility. As it happens, my monthly contributions don't really change the %s of my assets very much.
Hi,

how do you add to your 4 assets every month?

Isn't it expensive?

I was talking about doing it annually or when bands are touched...
[/quote]

3 of them I do without transaction costs (Vanguard funds, bonds/bills at Vanguard, I-bonds through the US Treasury). Gold coins kinda have the +/- built into the pricing, since if you buy 1 coin or 10, there is a % on it. IAU is the only thing that has a transaction cost, usually about 1%, but it depends on how many shares I buy, if I saved up extra cash one month, then the transaction cost would be very low.

Rebalancing I'd do when I hit rebalancing bands, and maybe once a year around my birthday?
I hated all the things I had toiled for under the sun, because I must leave them to the one who comes after me. Who knows whether that person will be wise or foolish? Yet they will have control over all the fruit of my toil into which I have poured my effort and skill under the sun. . . Nothing is better for a man than to eat and drink and enjoy his work.
- Ecclesiastes
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Re: Reallocation Bands

Post by frugal » Mon Jul 08, 2013 12:28 am

Kriegsspiel wrote:
frugal wrote: I began by rebalancing with new contributions (adding to the lagging asset), but recently switched to equal contributions to all 4 asset classes. This way, I hope, I will hit rebalancing bands and lock in gains/harvest volatility. As it happens, my monthly contributions don't really change the %s of my assets very much.
Hi,

how do you add to your 4 assets every month?

Isn't it expensive?

I was talking about doing it annually or when bands are touched...
3 of them I do without transaction costs (Vanguard funds, bonds/bills at Vanguard, I-bonds through the US Treasury). Gold coins kinda have the +/- built into the pricing, since if you buy 1 coin or 10, there is a % on it. IAU is the only thing that has a transaction cost, usually about 1%, but it depends on how many shares I buy, if I saved up extra cash one month, then the transaction cost would be very low.

Rebalancing I'd do when I hit rebalancing bands, and maybe once a year around my birthday?
[/quote]

Unfortunately in EU-PP we can't do that.

I wish to be american :-)
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Re: Reallocation Bands

Post by blackomen » Tue Jul 09, 2013 11:12 am

What I currently do:

I use a combination of actual "cash" plus short-term bonds and UUP (dollar index) for cash.  This portion should sum up to around 25% by default.

Money that I periodically contribute to the portfolio goes in to the cash portion.  If the cash portion is overweight, I rebalance accordingly.

My "hard" rebalancing bands are 15/35..  meaning whenever something hits 15% or 35% weight, I must rebalance.  It doesn't matter if I'll incur unfavorable tax treatment (i.e. wash sale, capital gains, etc.) or if the technicals, fundamentals, and/or sentiment doesn't justify.

I also use "soft" rebalancing bands of 20/30..  they can be acted upon if it doesn't incur a wash sale and preferably if it results in a Long-term capital gains..  I can also opt out if the technicals or fundamentals don't justify such a trade.
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Re: Reallocation Bands

Post by frugal » Wed Jul 10, 2013 6:59 pm

OK, good

I think I am going to invest on myself or add fresh money to my EU-PP

US-PP will add more risks for me: currency, money abroad ...
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