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F off with this advice.Take that for sure. Guard your cash flow, as you're a small timer ( ), and pay off more as you can.
Why?
Short answer: a combination of laziness and not really seeing an advantage.
I have never been very far out of balance. My IRA, as an example, is 3 funds that were roughly evenly split today, my small cap fund is down about 3 points relative to the original allocation because it is only up 1.46% this year vs 14.62% on the large cap. If I had reallocated at the beginning of the year, I would actually be under performing where I am now because I started the year off with it down by about 1 point.
That's obviously hindsight logic, but I've done the exercise several times over the years and it almost always comes out a wash. I think I posted in this thread where I did the math reallocating last year, and I would have been better off by <1%.
Overall, the idea of rebalancing feels a bit like timing the market. As @lawyerdad pointed out, it isn't exactly the same, but the idea is similar: these funds have overperformed or underperformed the rest of the portfolio, so let me change my bets slightly to compensate.
If I look at a chart like this, I see that all the while I would have mostly been taking money out of my mid cap and moving it to small and large cap, and ultimately I would be poorer for it, but it seems primarily driven by some major gains in the early 2000s.
On the contrary, over the last 10 years, my large cap has always been the best performer by 2-3 points. Maybe in the future midcap will really take off, and if I reallocate now I'll come out ahead.
Maybe someone can show me the math on how if I had been rebalancing all the time it would make a meaningful difference to my portfolio value in 20-30 years by reallocating regularly, I'd do it.
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What got me thinking about this was changing my bond exposure by moving new purchases to bonds both as a reaction to my age and what might be about to happen to equities. I figured I would see what happens through November and then maybe move my allocation at least partially back to equities. Sort of rebalancing to a new allocation model based on new money but then it hit me I might actually be engaged in some form of market timing.
Anyway, we're plowing thousands a month into bonds right now and at least until after the election.
I don’t see rebalancing as timing as much as I do risk adjusting.
Yeah, unless you are saying something like "international has gotten small in my portfolio so I need to rebalance because foreign stocks are about to blow up" then I don't see where the timing element is coming in.I don’t see rebalancing as timing as much as I do risk adjusting.
TWSS.My international sucks, but you know as they say, stick with it