Portfolio rebalancing question

**bjl584** · 05-26-2011, 07:27 AM

I would recommend playing the markets outside of your retirement account. Your retirement fund is for retirement and you should stick to a disiplined investing strategy with it.

I am a semi active trader and do have investments in individual stocks and in funds, but I do all of that in a seperate brokerage account.

**Petunia 100** · 05-26-2011, 07:29 AM

Do you know when US stocks are going to cool? If so, great! Use that knowledge to your advantgage. If not, rebalance.

**elessar78** · 05-26-2011, 07:33 AM

I don't play the markets. Although my post made it sound like I'm concerned about that stuff. I would label myself as a disciplined, non-market timing investor. But since I set an arbitrary date to rebalance, I just wonder if there's any harm in letting it go a little longer before rebalancing.

I did not mean to give the impression that I know when the market will heat up or cool down.

**bjl584** · 05-26-2011, 07:47 AM

Originally posted by elessar78 View Post

I don't play the markets. Although my post made it sound like I'm concerned about that stuff. I would label myself as a disciplined, non-market timing investor. But since I set an arbitrary date to rebalance, I just wonder if there's any harm in letting it go a little longer before rebalancing.

I did not mean to give the impression that I know when the market will heat up or cool down.

How far are you from retirement? If is is several decades, then letting that fund ride a few extra months or rebalancing now will probably have no bearing on the total value of your account when it comes time to retire. But, if you want to let it ride to see if you can make some extra gains on it, then go for it. It may work to your advantage or to your disadvantage. But, at the end of the day it probably won't matter much so long as you stick to a disiplined investing strategy over the long haul.

**JoshuaHeckathorn** · 05-26-2011, 08:16 AM

I don't rebalance until I'm more than 10% off my intended allocations.

**elessar78** · 05-26-2011, 08:34 AM

I'm in my 30s. 80/20 stock to bonds. My planned allocation for equities was 50/40/10 (US/EuroPac/REIT) but as of right now it's at 83/15/1 (for stocks only) . . . so you could say it's severely out of balance. I've just been getting more knowledgeable about this stuff in the past year or two. So JH, I'm off quite a bit. I rebalanced a year ago, but something went wrong with the order and the company didn't put the request through. No biggie, it didn't hurt at all but that's why the proportions are so off.

BJL, I figured as much. But I'm trying to flesh out my philosophy on investing these days. Thanks for the insight.

**Petunia 100** · 05-26-2011, 10:05 AM

<< I did not mean to give the impression that I know when the market will heat up or cool down. >>

Oh, you didn't. I was being a little tongue-in-cheek, sorry. My point is since we can't know for certain, we are better off just doing what we know works to our advantage in the long term. Make a reasonable asset allocation plan, rebalance, watch costs.

**Slug** · 05-26-2011, 10:07 AM

I recommend re-balancing once a year. Now is as good at time as any. Just set a meeting on your calendar in perpetuity to do it on this date so you're consistent.

**robertgpitts** · 05-26-2011, 10:38 AM

I like JH's suggestion to rebalance at a fairly low percentage deviation from your target allocation. William J. Bernstein has a great discussion on this topic and dollar-cost averaging in "The Investor's Manifesto."

Robert Pitts
Freedom Personal Finance
Lakeland, FL

**isralexba** · 05-29-2011, 06:30 AM

Portfolio rebalancing ....

Originally posted by elessar78 View Post

..... (US/EuroPac/REIT)? In this scenario, is riding the hot hand just another form of market timing?

I think the answer to that is yes, and all investors recommend against it ...I can say that we have tried this several times and investing in specific sectors might be risky ...
rebalancing actually relates to the bond / stock proportion and should be done systematically...

**kork13** · 05-29-2011, 07:39 AM

The idea of having an asset allocation is that you use it. If you don't like it, change it. But if it still matches your goals, risk level, etc., you need to stick to it.

My recommendation (if possible) would be to simply add money to the trailing categories. That way you don't sell any of your well-performing shares, but still get to buy into the "discounted" under-performers. If necessary, stop buying new shares of the US stocks, diverting all of those funds to the other categories. It won't immediately adjust your stock mix, but over a period of months, you'll get back to where you need to be. Besides, a DCA investor never needs to make immediate, significant changes. Do everything slowly.

**jpg7n16** · 06-01-2011, 03:39 PM

Originally posted by elessar78 View Post

Do I ride the hot hand of US stocks and rebalance when they cool?

Technically, I could argue that you have already ridden the hot hand of the U.S. Market - as indicated by its increase in value so far.

The point of rebalancing is to sell off some of the winners and/or buy into the (hopefully) soon-to-be winners, until you are back in balance.

Portfolio rebalancing question