Cash has exceeded my rebalance band, but....?

[Cortopassi]

Cash in my PP, due to additions from 401k, and dropping of all other assets, has hit 140% of target (14.1% vs. 10% target).

I already am not technically following the true PP with a lower cash allocation, obviously.

I am now faced with a choice. Do I rebalance now, because of the cash band and stay true, wait until Jan for my annual rebalance, or continue to accumulate cash because Shit is Going to Hit the Fan even more across assets in the next few months, minimum?

That would be predicting, which I am not supposed to do.

The way my spread is right now a rebalance from cash would go ~50% to bonds, 30% to gold and 20% to stocks.

[buddtholomew]

Cash in my PP, due to additions from 401k, and dropping of all other assets, has hit 140% of target (14.1% vs. 10% target).

I already am not technically following the true PP with a lower cash allocation, obviously.

I am now faced with a choice. Do I rebalance now, because of the cash band and stay true, wait until Jan for my annual rebalance, or continue to accumulate cash because Shit is Going to Hit the Fan even more across assets in the next few months, minimum?

That would be predicting, which I am not supposed to do.

The way my spread is right now a rebalance from cash would go ~50% to bonds, 30% to gold and 20% to stocks.

No right or wrong answer of course.
If I was in your shoes, allocate 2% now and then follow your January rebalancing plan.

[barrett]

Cash in my PP, due to additions from 401k, and dropping of all other assets, has hit 140% of target (14.1% vs. 10% target).

I already am not technically following the true PP with a lower cash allocation, obviously.

I am now faced with a choice. Do I rebalance now, because of the cash band and stay true, wait until Jan for my annual rebalance, or continue to accumulate cash because Shit is Going to Hit the Fan even more across assets in the next few months, minimum?

That would be predicting, which I am not supposed to do.

The way my spread is right now a rebalance from cash would go ~50% to bonds, 30% to gold and 20% to stocks.

No right or wrong answer of course.
If I was in your shoes, allocate 2% now and then follow your January rebalancing plan.

Yeah, I was going to say the same thing. It's also helpful for me to think in terms of actual dollars. So, say you have $1,000,000 total and you have $40,000 in cash that you want to "put to work". That would be about $20,000 going to stocks, $12,000 to gold and $8,000 to bonds. If you throw it all in now and stocks go down another 10%, you've lost $2,000 on the stock portion.

[ochotona]

My stock answer is, spread out your rebalance program over several months, in bites that are small enough that you won't fret.

[Cortopassi]

Thanks!

[Kbg]

I disagree. Over the long run discipline will payoff in terms of total return. Additionally, if you have a strategy and then don’t actually follow it then A) quit lying to yourself and admit you don’t actually have plan and don’t actually care to follow whatever it is you thought you had B) Just forget every single backtest or performance measurement and risk profile you think you have because in point of fact, you don’t have what you think you have because you’re not doing it.

Flip the marble in the roulette wheel and let it roll...could be awesome, could be bad.

[Cortopassi]

I disagree. Over the long run discipline will payoff in terms of total return. Additionally, if you have a strategy and then don’t actually follow it then A) quit lying to yourself and admit you don’t actually have plan and don’t actually care to follow whatever it is you thought you had B) Just forget every single backtest or performance measurement and risk profile you think you have because in point of fact, you don’t have what you think you have because you’re not doing it.

Flip the marble in the roulette wheel and let it roll...could be awesome, could be bad.

kbg, definitely good points. The only reason I brought this up is my tweaked 10% cash level vs. the standard 25%. If I was still at the standard setup, I would be nowhere near the rebalance band for cash, so I am walking a line here.

And now looking at my numbers this morning, after mutual funds priced, my breakdown is cash would go 35% stocks, 40% bonds, 25% gold. Interesting the change over the course of a few hours.

[sophie]

A good reason not to rebalance now: you might not be able to tax loss harvest for another 31 days. If that's in the cards, you might want to do that first and then rebalance when you change investments back in 31 days.

Or, is this really about sticking with your cash target allocation of 10% vs increasing it? Fair question, but the danger is that you keep tweaking the portfolio as you go, and end up with an active management strategy. You might beat the vanilla PP if you do that, or you might lose out. Probability favors the latter.

[Ugly_Bird]

but the danger is that you keep tweaking the portfolio as you go, and end up with an active management strategy.

It was very tempting to rebalance before recent stock turmoil had started. My cash and stocks portions of 4x25 HBPP were somewhere close to 27-28 ish %, while gold and LTTs approached low 20th %. Now it is too late :-) After all, it is just easier to do nothing: will stick with 15/35% bands as the doctor prescribed.

[Cortopassi]

but the danger is that you keep tweaking the portfolio as you go, and end up with an active management strategy.

It was very tempting to rebalance before recent stock turmoil had started. My cash and stocks portions of 4x25 HBPP were somewhere close to 27-28 ish %, while gold and LTTs approached low 20th %. Now it is too late :-) After all, it is just easier to do nothing: will stick with 15/35% bands as the doctor prescribed.

Darn it. I have mentally decided 10% cash is the right spot for me long ago, so I will rebalance. Then I also have to stick to my guns and do an annual rebalance in Jan.

[jhogue]

1. I decided last year to switch last year from annual rebalancing to 15/35 bands. Not market timing, but hoping to favorably catch future market swings.

2. Remember that, in the short run, you can never have too much Cash. In fact, more than any of the four HBPP assets, Cash makes me feel rich.

3, I find that having a written investment plan for the year helps take the emotion out of investing.

[Kbg]

Carto...good job! However, Sophie, as always, made a great point...always do the tax math. We don’t know the future, we can estimate taxes consequences with great precision. So from a tax perspective a rebalance may make a lot of sense. I’m not saying yours does right now as I have no idea...but yeah, run the numbers for your situation.

Historically we are moving into the best investment months of the year, so one could project a rebound and likely the Fed is done raising rates this year...and that would be my personal scenario if I had a significant tax implication to make a decision on. Taxes should be the big dog variable and near certain as to the impact, market scenario should be a minor variable. If the market is making the whole thing near random (don’t really know) then stay disciplined. One quick example, tax loss harvesting when you are down more than a likely rebound is almost a no brainer. You know the impact by doing it “now” and it will be advantageous. The future market may or may not make the harvest better or worse.

[Kbg]

Jh,

Short term yes, long term categorically false...and particularly so if real vs nominal is negative as it is now.

(And yes age is a factor...but as a general rule the above is a better principle to guide your portfolio by.)

Edit...I’m only referring to item #2.

[jhogue]

Kbg,

1. You make an excellent point about accounting for tax implications.

2. I absolutely agree that you want to have a long term strategy for Cash, which is precisely why I am such a fan of I bonds.

[buddtholomew]

but the danger is that you keep tweaking the portfolio as you go, and end up with an active management strategy.

It was very tempting to rebalance before recent stock turmoil had started. My cash and stocks portions of 4x25 HBPP were somewhere close to 27-28 ish %, while gold and LTTs approached low 20th %. Now it is too late :-) After all, it is just easier to do nothing: will stick with 15/35% bands as the doctor prescribed.

Darn it. I have mentally decided 10% cash is the right spot for me long ago, so I will rebalance. Then I also have to stick to my guns and do an annual rebalance in Jan.

I don't see this as a negative at all, but rather a win-win.
Where does it say that you have to re-balance to established percentages with 1 TRADE?
You are moving towards your 10% allocation. Period. Well done.

I'll also add that I used the last few weeks to now have 50% SPY/50% SCV as my stock allocation from cash as well - 30/20/15/35 finally.
Curious what others re-balancing bands would be for a 10%, 15%, 20% allocation.
Is it still % allocation x .4 such that 25*.4 = 10 which is the re-balance band for 25% allocation using 15/35 method.

[Cortopassi]

Was going to pull the trigger today, but did not have time. Sometime tomorrow I hope.

[Cortopassi]

And it hasn't happened yet because of time, but of course it is trending back to where I thought it would, needing to dump more into gold and less into stocks. Ahh the black hole that is gold....

[buddtholomew]

And it hasn't happened yet because of time, but of course it is trending back to where I thought it would, needing to dump more into gold and less into stocks. Ahh the black hole that is gold....

Same story as ever...at least this time I sold gold and bought SPY/SCV...

This portfolio doesn’t work since you should be buying stocks when they decline not sit in Gold and LTT’s...what a dump.

[Ugly_Bird]

This portfolio doesn’t work since you should be buying stocks when they decline not sit in Gold and LTT’s...what a dump.

Not so today? Let's keep looking every... hmm.. 10 minutes. :-)

[Cortopassi]

It is a strange commodity. And they'll try to link its rise to some event, which is almost 100% inaccurate.

[Ugly_Bird]

It is a strange commodity. And they'll try to link its rise to some event, which is almost 100% inaccurate.

No, no, no. They told you it would happen! :-)

[Cortopassi]

I have not rebalanced yet, and one of the reasons I dropped cash to 10% was because it has been paying nothing for a long time. Now the cash I have at Ally is at a 2% interest rate, and I wonder if that warrants raising cash a bit higher than 10%.

Tinkering around the edges...darn it.

[jacksonM]

Goldman Sachs is saying it's time to "Boost Cash".

So is it really a good idea to sell stocks and increase cash right now or is their advice part of the scheme to increase revenues from transaction fees by having people jump in and out of the market?

Considering the source, I'm going with the latter.

[Kbg]

Whatever your plan is do that.