I think I'll rebalance today

[curlew]

I'll be rebalancing myself shortly because I just initiated the rollover from my ex-employer's Vanguard 401k to my Fidelity IRA. Most of it was stock so the figures were all time highs and looked pretty impressive. Unfortunately they were only estimates because what I always hate about 401k rollovers is that the timing of the sale is completely out of your hands. A lot can happen before the transactions are complete. And then, of course, when the rollover is complete you have to decide whether to jump right back in or try to time the market.

Now that I've been forced into retirement at least it will be my last 401k rollover.

[ochotona]

IDK, I think stocks are the way to go. They have so much momentum right now. I'm looking at the banks, railroads, energy, the Dow, Russia, Greece, Hang Seng, Germany and Argentina to name a few. This is mainly for my VP.

Emerging markets and small-cap international (ex-US) are definitely getting revved. I would not be surprised to see them overtake US equities on a 1-year look-back momentum basis. I have started to buy.

[MachineGhost]

IDK, I think stocks are the way to go. They have so much momentum right now. I'm looking at the banks, railroads, energy, the Dow, Russia, Greece, Hang Seng, Germany and Argentina to name a few. This is mainly for my VP which has been on fire since I made a big bet on stocks on Feb. 11th of this year, at the low.

We're coming out of an 18-month consolidation and literally everything is green at this point but the small & micro-caps. They will be the last to confirm broad "risk on" participation. Not that it really matters, but China has not been participating in the emerging market rally.

I'm effectively 0% in T-Bonds. I see no need to be in them unless stocks decide to go into a bear which is always a possibility between now and November. A surprise Trump win could be like 1987 as people will absolutely panic.

[dualstow]

I'm effectively 0% in T-Bonds.

Ok, so no bonds, but didn't you write a few weeks ago that you were hoping to get out of gold and "into pure treasurys"? Are you holding short-term notes?

[MachineGhost]

I'm effectively 0% in T-Bonds.

Ok, so no bonds, but didn't you write a few weeks ago that you were hoping to get out of gold and "into pure treasurys"? Are you holding short-term notes?

I don't remember, but I may have had a momentarily lapse of weakness in wanting to be a PP purist before common sense reared its pretty head again. Its all in cash now and I may stack it in 5 year CD's when I get around to it. I plan to put the Treasury hedge back on when there is an appropriate signal on the equity and I'm also also thinking about diversify into other bear-market assets than just Treasuries (i.e. long VIX, short SPY, cyclicals, etc.). I just can't stomach holding 25% into long-duration T-Bonds with governments going bankrupt around the world... you see what happened to the Japanese 40-year bond lately? Petrified.

In other words, I'm convinced stocks, gold and the USD are going to go up and Treasuries murdered. Black swans show up when you least expect them.

[curlew]

I'm effectively 0% in T-Bonds.

Ok, so no bonds, but didn't you write a few weeks ago that you were hoping to get out of gold and "into pure treasurys"? Are you holding short-term notes?

I don't remember, but I may have had a momentarily lapse of weakness in wanting to be a PP purist before common sense reared its pretty head again. Its all in cash now and I may stack it in 5 year CD's when I get around to it. I plan to put the Treasury hedge back on when there is an appropriate signal on the equity and I'm also also thinking about diversify into other bear-market assets than just Treasuries (i.e. long VIX, short SPY, cyclicals, etc.). I just can't stomach holding 25% into long-duration T-Bonds with governments going bankrupt around the world... you see what happened to the Japanese 40-year bond lately? Petrified.

In other words, I'm convinced stocks, gold and the USD are going to go up and Treasuries murdered. Black swans show up when you least expect them.

If you are convinced that stocks, gold, and USD are going to go up why are you all in cash?

[Reub]

I'm nowhere near the 35% bands, more like 29-something. But, it feels like the right time to invoke a seasonal rebalance as it's been well over a year since I really sold stocks.

I hope stocks continue to climb. Dow at 20K would be nice.

It seems that political arch villain and billionaire investment tycoon George Soros is doubling down on his bearish US stock market bet so maybe you're right, dualstow.


http://www.marketwatch.com/story/soros- ... 2016-08-16

[MachineGhost]

If you are convinced that stocks, gold, and USD are going to go up why are you all in cash?

My former unpure Treasuries are all in cash.

Soros is either making a very stupid bet or he's betting on a fall swoon which he'll then cover. At 86 years old and retired I don't think he has any sense of the markets any more, but we'll see. Shorting the Pound in 1992 wasn't his trade, it was Druckenmiller's. He just provided the fund/capital.

[dualstow]

I'm nowhere near the 35% bands, more like 29-something. But, it feels like the right time to invoke a seasonal rebalance as it's been well over a year since I really sold stocks.

I hope stocks continue to climb. Dow at 20K would be nice.

It seems that political arch villain and billionaire investment tycoon George Soros is doubling down on his bearish US stock market bet so maybe you're right, dualstow.


http://www.marketwatch.com/story/soros- ... 2016-08-16

Right about what? I'm not making any bets or predictions. It's just been well over a year since I did any rebalancing.
I have no idea where the market's going.

[buddtholomew]

Managing around the edges has little to no effect on returns but it certainly can benefit psychologically.
1M portfolio, 30% stocks (300K).
Sell 5% (15K) to cash and restore asset allocation.
A 20% decline on the 5% (3K).
Your timely move only resulted in a savings of 3K or .3% of your portfolio.
You still experienced a 57K loss on your remaining 25% invested in stocks.

When I did the math for myself I decided it was not worth it.

[Pet Hog]

Managing around the edges has little to no effect on returns but it certainly can benefit psychologically.
1M portfolio, 30% stocks (300K).
Sell 5% (15K) to cash and restore asset allocation.
A 20% decline on the 5% (3K).
Your timely move only resulted in a savings of 3K or .3% of your portfolio.
You still experienced a 57K loss on your remaining 25% invested in stocks.

When I did the math for myself I decided it was not worth it.

Budd, in your example the rebalance would require selling $50k of stocks to cash (5% of total portfolio). That's about 17% of the stock holdings, not 5%. A 20% decline on the 17% would be $10k. That's 1% of the portfolio. And, sure, you'll experience a 50k loss on the remaining stock holdings. But not quite as bad a scenario. I see that 1% saving as the difference between, say, a 5% real return for the year and a 6% real return. Not insignificant when compounded. Heck, I would welcome even a 0.3% addition to my CAGR (if this were an annual rebalance scenario).

[buddtholomew]

I knew something was wrong with my math...
Nevertheless, for me it's a taxable account so tax implications are a consideration as well reducing the 1% further.

[dualstow]

Time for another trim. My S&P shares are just below doubling, 99.93% Other stock funds are below that.
If I trim now, this trim combined with the August one will form a true rebalance.
No regrets if the market still goes up.
Dow at 25K would be nice.

I'm nowhere near the 35% bands, more like 29-something. But, it feels like the right time to invoke a seasonal rebalance as it's been well over a year since I really sold stocks.

I hope stocks continue to climb. Dow at 20K would be nice.

[ochotona]

Celebrate the 2-bagger!

[dualstow]

...maybe I'll drag my feet until I'm a little closer to 35% in stocks.
< rationalized greed >

FORGOT TO SAY: after hearing Buffett's comments and then Trump's speech last night.

[Cortopassi]

Time for another trim. My S&P shares are just below doubling, 99.93% Other stock funds are below that.
If I trim now, this trim combined with the August one will form a true rebalance.
No regrets if the market still goes up.
Dow at 25K would be nice.

I'm nowhere near the 35% bands, more like 29-something. But, it feels like the right time to invoke a seasonal rebalance as it's been well over a year since I really sold stocks.

I hope stocks continue to climb. Dow at 20K would be nice.

Dualstow, what timeframe did it take for your S&P shares to double? I'm not clear on what you mean by double, even if I go back 5-10 year charts, I am not seeing a double on SPY? Do you mean a double of a band range?

[dualstow]

My initial investment in Vanguard's S&P fund was a paltry 3,000 in 2008, and I had it on auto-pilot after that. Sometimes I changed the timing of contributions between every week and every month, and sometimes I changed the amount of contributions between a few hundred $ at a time and $1,000 at a time, so not completely auto, but it kept buying steadily.

I would have to look up when I stopped buying, but it has as much to do with switching to small-cap value as it did hitting the proper allocation. And again, my holdings in non-S&P equity are not at double.

But I did mean a true 100% gain in value on the S&P shares. The holdings are worth 2x the cost.

[Cortopassi]

Very nice. I hope to echo this in some holding over the next few years. Not bonds, at least not today.

[dualstow]

Yeah, poor bonds.
I'm really feeling that "angst" -- high class problem, I know -- regarding whether to sell some S&P or just make the pp larger.

All the data, the same data that favors going all in with lump sum investing vs dollar cost averaging, says it would be silly to take profits just because some magic number (which is not a rebalancing band) was hit, and equally silly to think that money will go back into the market at the right time, when stocks have crashed.

At the same time, I know my heart is going to sink when stocks start to decline if I haven't trimmed.

The solution is probably to do a meaningless, inconsequential small trim for psychological purposes.

[sophie]

Hey dualstow, did you sell those stocks? and what did you do with the proceeds?

I've managed to set up recurring monthly purchases of all four assets in equal amounts, including bonds. I'm nowhere near a rebalance, thanks to a recent partial "rebalance" done by unevenly dividing new purchases over the past few months. Given the Fed's plans for the next two years I'm wondering if I did the right thing...but would rather not try to make bets as we all know what's happened to the Fed's plans in past meetings.

[dualstow]

I did not,Soph. It seems silly to do so since vp+pp is already at 50% stocks, which is what I want.

I'll probably unload a few K for the psychological benefit.
I'll put it into treasury notes if Yellen gives us tasty yields. If not, intermediate muni bond fund in vp gets it. Or IBonds, which I've skipped for several years.

[sophie]

Good rationale, but sounds like you'd just rather do nothing - always a good choice. I'm doing much the same thing. Just going to wait for those rebalance bands to trigger.

It'll be interesting if the 1 year T bill starts paying better than 1 year CDs, which is already almost the case. Especially if you take state/local taxes into account.

[dualstow]

That would be nice. I'm usually too lazy tobother with CDs.

[dualstow]

It's funny, Desert. Your message came in while I was reading a paper-mailed offer from a bank. 1% interest plus a $200 bonus if I deposit $10K.