Getting Ready To Rebalance

[Reub]

Even though my stock portion is still below 35%, I am getting ready to rebalance.

What do you think about this strategy?

[Tyler]

Sounds like a good plan to me.  I normally would say to stick to the bands, but rebalancing is the safest form of market timing if it makes you sleep better.

The only thing I'd add is that you haven't already, you may also consider using the PRPFX money to deleverage by paying off a mortgage or any other outstanding debt.  Nothing beats being newly retired and debt-free. 

[Alanw]

Even though my stock portion is still below 35%, I am getting ready to rebalance. Being newly retired, I feel that this will lessen my risk if there is a major correction (or worse). After all, it is almost "sell in May" time anyway. Besides, TLT and gold both seem to have settled down nicely. I will not be selling my stock portion, but will instead liquidate all of my remaining PRPFX (with a slight loss) and rebalance by redistributing these funds. After the huge capital gains distribution that PRPFX gave off last year (about 10%) I will say good riddance to it.

Any thoughts?

I have chosen rebalance bands of 30/20 for the PP portion of my portfolio.  Being semi-retired (mostly retired) this should lessen the volatility a little more at the expense of a small reduction in upside potential.  I have had to rebalance the stock and bond portions each once in the past three years and have missed out on some of the stock runup but the PP seems to be chugging along nicely.

[Alanw]

HB did not adhere strictly to rebalance bands of 35/15.  You could choose 30/20, 33/17, etc. or whatever suits your comfort level.
But you should probably stick to the one you choose or you could be guilty of market timing.

[AdamA]

After all, it is almost "sell in May" time anyway.

What if you had sold last May?

[MachineGhost]

Even though my stock portion is still below 35%, I am getting ready to rebalance. Being newly retired, I feel that this will lessen my risk if there is a major correction (or worse). After all, it is almost "sell in May" time anyway. Besides, TLT and gold both seem to have settled down nicely. I will not be selling my stock portion, but will instead liquidate all of my remaining PRPFX (with a slight loss) and rebalance by redistributing these funds. After the huge capital gains distribution that PRPFX gave off last year (about 10%) and it's lack of long bonds I will say good riddance to it.

What do you think about this strategy?

PRPFX is very commodity heavy, so I doubt it will have much more than a minor effect on your equity allocation.  I sold PRPFX in 2007 before the crash.  So its good thing either way.

We have a crash warning right now but damn if the market doesn't seem to want to pull off another trick shot upwards.  Plus retail investors are all expecting a crash.  Do crashes happen when people are expecting it, or only when you run out of buyers?  Does prevailing sentiment at a top determine a correction from a crash?

I'm real tempted to buy some equities hedged by bonds and say !@#% it.  But if I do that, then we'll crash for sure.  I realize the real problem isn't in doing that per se, its what is hedging the bonds?  Because gold isn't doing that right now.  Gold is klling the PP!

[annieB]

Good chart TPG.
Thanks!

[frommi]

In particular, if you put $10,000 in SPY on January 1, 2009, and got out every May 1 (and back in the following January 1), you would have had $13,358 by Dec 31, 2013.  This is a 6% CAGR.

OTOH, if you'd have let it ride year round, you'd have $24,524.  This is a 20% CAGR.

From statistics it is best to leave somewhere in the middle of May and come back at the end of October. November and December are strong months, you don`t want to miss them .
This can be a good strategy for this year, i will hedge my 105% value-stock allocation with a small 4-5% index put position from May to October.