slightly confused about rebalancing

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dualstow
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Re: slightly confused about rebalancing

Post by dualstow » Mon Oct 10, 2011 8:36 pm

I think the key is your second paragraph. That is, gold would more likely be through the roof on the eve of a depression, forcing you to rebalance months before (and hell, *during*) the recognition of a depression, not hovering at 34%.

Of course, Harry Browne also said that he picked the 25% shares for simplicity, so I don't think it would kill you to take profits at 34% or to ignore your portfolio while lounging in Ubud, Bali at 36%. I saw that some of you knocked gold back to 30% well before that $100-in-one-day drop.
Last edited by dualstow on Mon Oct 10, 2011 8:38 pm, edited 1 time in total.
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Re: slightly confused about rebalancing

Post by edsanville » Mon Oct 10, 2011 9:51 pm

I fully agree that the quantitative analysis may be a bit much, but I did it for one main reason:  I don't like doing something arbitrary without understanding why I'm doing it.  So, my initial question was "why 15/35?"

From the analysis I did, it does turn out that the exact rebalancing band doesn't matter as much as I thought it might.  Rebalancing every day is within a percentage point of rebalancing at a 5/45 band!  That's pretty interesting information right there, if you ask me.  I'm sticking with 15/35, myself.  My curiosity has been satisfied.
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Re: slightly confused about rebalancing

Post by vnatale » Wed Jan 15, 2020 8:45 pm

What are current thoughts regarding this? And, more importantly, what IS YOUR rebalancing method, e.g., how frequently, what triggers it?

Vinny
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Re: slightly confused about rebalancing

Post by Kbg » Wed Jan 15, 2020 10:36 pm

Rebalancing benefits or costs are completely path dependent. There is really no solid "evidence" statistically for one method over another. That's the bottom line. The standard line, which I concur with, is that rebalancing is primarily about risk not performance.

In/assuming a taxable account, one can mess around with different methods to see what the tax hit is which is a useful exercise. Such an approach looks at frequency of trades and assesses the distribution of ST and LT capital gains taxes and then adjusts performance expectations accordingly.
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Re: slightly confused about rebalancing

Post by KevinW » Tue Feb 04, 2020 12:36 pm

Monthly deposits go into cash. I check the portfolio annually with a calendar reminder, and also after a major finance-related world event that everyone's talking about (e.g. 9/11 or the 2008 global financial crisis). If it's within the 15/35 bands I do nothing, otherwise I rebalance to 4x25. (IIRC this is precisely Browne's advice on the radio show.)

For the first 10 years or so of accumulation, after every annual check cash was overweight and I bought the other assets. Now that the portfolio is larger relative to deposits, I don't necessarily have to rebalance every time. So far I've never sold stocks/bonds/gold.
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Re: slightly confused about rebalancing

Post by vnatale » Sun Mar 01, 2020 5:54 pm

Did these past week's events cause any of you to rebalance? If so, what bands that you are using were crossed?

Vinny
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sophie
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Re: slightly confused about rebalancing

Post by sophie » Mon Mar 02, 2020 8:21 am

Think it's a bit early to rebalance yet. A 10% drop in one asset, especially one that was probably over-weighted going in, isn't going to shift your asset percentages by more than 3-5%.

However, this is absolutely a tax loss harvest opportunity! I was going to do it on Friday, but decided to wait and see what happened today. So far, that was the right move. Anyone thinking same?
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Re: slightly confused about rebalancing

Post by drumminj » Mon Mar 02, 2020 9:11 am

I've never tax-loss harvested before, but understand the basic concept. You can't purchase the same security for 30 days though to avoid the wash sale rule though, right? So what are you thinking of selling, and will you simply sit in cash for the 30 days, potentially missing a bounce back as central banks flood the world with liquidity?
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Re: slightly confused about rebalancing

Post by Xan » Mon Mar 02, 2020 10:28 am

drumminj wrote:
Mon Mar 02, 2020 9:11 am
I've never tax-loss harvested before, but understand the basic concept. You can't purchase the same security for 30 days though to avoid the wash sale rule though, right? So what are you thinking of selling, and will you simply sit in cash for the 30 days, potentially missing a bounce back as central banks flood the world with liquidity?
My understanding is that there isn't a formal definition of when two investments are "too close" and thus fall under wash sale rules.

If you're swapping an S&P 500 index for a total market index, I think it would be hard for the IRS to claim those are the same. Or a closed-end gold fund for an open-ended gold fund. Or a Treasury with 20 years left for one with 30 years left.

Basically, I think (but nobody can say for sure) that there are a lot of ways to get sufficient coverage during the 30-day window without falling afoul of the wash sale rules.
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Re: slightly confused about rebalancing

Post by pmward » Mon Mar 02, 2020 10:54 am

I harvested some IJS (S&P 600 value) for VBR (CSRP small cap value).

Also, I put my full yearly bonus that I got on Friday into stocks, which is technically a rebalance without selling anything. It worked out quite nicely as for the last 4 months or so while stocks had been blowing up all my new cash was going into bonds during their pullback. Now bonds are ripping, stocks are pulled back, and my fresh funds are all going into stocks. I like buying long term assets when they are down, I hate having to buy an asset that is at a high, though I still do it if the asset is the lowest.
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Re: slightly confused about rebalancing

Post by sophie » Tue Mar 03, 2020 8:07 am

I spoke too soon yesterday :-) but looks like the market will drop again today, so I'm pulling the trigger.

I switch to a stock fund just different enough to avoid the wash sale. For Vanguard I switch between the passive and tax managed fund versions. For Fidelity it's a bit harder. I have to switch between total market and small cap funds. You hold the new fund for at least 30 days. If it gains a lot in the meantime, I'll just hang on to it. If it loses, all the better, just sell it to claim some more losses.

WARNING: check to make sure you haven't done any reinvestment of dividends/gains in the last 30 days!!! And obviously don't sell any lots less than 30 days old.
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Re: slightly confused about rebalancing

Post by vnatale » Thu Apr 16, 2020 7:36 pm

KevinW wrote:
Tue Feb 04, 2020 12:36 pm
Monthly deposits go into cash. I check the portfolio annually with a calendar reminder, and also after a major finance-related world event that everyone's talking about (e.g. 9/11 or the 2008 global financial crisis). If it's within the 15/35 bands I do nothing, otherwise I rebalance to 4x25. (IIRC this is precisely Browne's advice on the radio show.)

For the first 10 years or so of accumulation, after every annual check cash was overweight and I bought the other assets. Now that the portfolio is larger relative to deposits, I don't necessarily have to rebalance every time. So far I've never sold stocks/bonds/gold.
So....how many times have you checked in 2020??!!

Vinny
"I only regret that I have but one lap to give to my cats."
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