Hey @rob_berger. Thanks for your work. I was revisiting this video and had an idea. In addition to (or possible without) the opportunistic rebalance method, what do you think about using new contributions as a balancing mechanism? For example, if the portfolio balance is off by more than the contribution amount, simply contribute to the "low" category(s) of the portfolio to bring them towards the target. If the new contribution is more than the deficit, then make up the deficit first and then spread the remaining contribution according to target allocation. Is seems like an approach like this would have you always investing on the value side, while also minimizing the sale of whatever assets are running up at that time. (Let them RUN!!!) This would also reduce the frequency and/or amount of any kind of rebalancing - regardless of method. I know it's a little more math than the average person wants to do, but that math does not deter me in the least. Thoughts? (or maybe a future video idea?)
Keep going bud I started at 41... was in 7K debt and living in my overdraft. I'm now debt free have a 15K emergency fund. 20K saving pot and just surpassed ~$100K in my portfolio. Diversification and consistency is key... I am almost 43 now!
I lost a lot chasing individual stocks and I feel pretty silly for not understanding how investing works. I have a double major in economics but I’ve been trying to make sense of the market. Well done on profits!
Great advice here. Keep it simple, buy things you understand, take some risk but don't try to shoot the lights out. I’m invested in ETFs, REITs, and individual stocks and use a CFA. On average, she takes 10% of earnings, but using *Lina Dineikiene's* system allows for a more hands-off approach. I conservatively follow her recommendations and market entry and exit points, and tbh this makes it fairly simple for me... I make more money with way less headaches:-)
Read Jack Bogle’s book on index funds back in the mid 1990’s. Put just 10% of my annual income in index funds and never looked back, never rebalanced. Retired this year with a portfolio of 2 million in my 403b. Thank you Jack Bogle
Well done, Sir. I'm a big fan of these conservative strategies. Especially as the inefficient markets become less and less common. Indexing is the way to go for the long-term. I enjoy watching Howard Marks also, another successful investor. Very conservative, makes a great argument against trying to beat markets.
This is a very solid investment channel. Its a pleasure listening to Rob. I was looking for some content on rebalancing for my all stock portfolio and here it is, with backing research and all.
This discussion is why I like what M1 does. Set your target allocation and as you make contributions they are directed toward assets that are below the target percentage. This of course is not helpful once you are no longer contributing, but for those of us still accumulating, it is a huge help if you care about your asset allocation.
I agree with Jack, right into retirement. As far as risk is concerned, do not look at %. Rather, consider how much you need to live on for around 2years, to minimize stock withdrawals when stock market tanks.
I don't think to rebalance is for more returns. To compare returns, in this case, proves anything at all. Rebalancing is more for risk management. Max drawdown is the real factor we should be looking at. Then, there are different ways to rebalance your portfolio. Unless you retired already, you should save and invest on a regular basis. That is how you want to rebalance. Simply put more money towards the lower parts you want to add.
I just read you book, and gave bought 3 more for my siblings. Such a great book for newbies packed with directions! Right after reading it I was able to create my Vanguard Target-Date fund using my Roth IRA as my employer do not offer 401K. I am also trying to max out my HSA contribution. Appreciate the guidance and can't be more excited for my journey as an investor here in the US. P.S. I am a new immigrant with prior investing experience in the Philippines.
I rebalance quarterly, but also keep an eye on things monthly. During COVID, I did a lot of opportunistic rebalancing. The main thing I watch is the Fear-Greed index. As long as the needle stays near the middle, the less opportunity there will be. When the needle swings, I look for which asset class is on sale.
I get where Jack is coming from: your buckets will rise and fall naturally, so don't mess with them. Perhaps rather than rebalancing the portfolio, one should rebalance one's monthly contributions so that the bucket that's doing well doesn't become over-weighted. Put more into the one doing not-so-well so you can buy into them at a discount.
So what happens if the "bad" part of your portfolio is going down because the stocks in it are a bunch of perennial losers on their way to absolute zero? Wouldn't that be throw good money after bad?
I've seen that. I didn't rebalance my original investments for my 401k and it grew very well, now that I've rebalanced it actually slowed growth can also see it on testfolio.
I Have kept a 65/35 portfolio for most of my adult life. When the market crashes (as sooner or later it does) i move 2 to 5 percent into stock index funds at a predetermined rate. Such as stocks down 10 % then 2 percent to the index fund. if down 30 % or more i bump up the 5 % more from bonds into stocks. DId well in 2009 and 2020 and 2022. When mkt bounces back i rebalance back to 65/35. Would love to see a historical study on this method.
Thank you so much for this video. I have been running the numbers and was beginning to question the rebalancing strategy myself. It is so good to see I was on the right track! Now - whether I will be able to put most of my retirement savings in bonds and never rebalance, we shall see!
Jack Bogle and Warren Buffett have been my North stars throughout my saving and investing. Amazing advice always delivered in clear and easy to understand language.
I have been 100% stocks most of the time with an unbalanced buy and hold portfolio. I received income from employment so did not need bonds which produce a poor return and lose their value whenever inflation increases. Spare savings going into whatever regional equities seem cheap. Have I been doing it all wrong?
It kind of depends on a persons age. Somebody closer to retirement or retired should have safer investments that they can sell if they need money especially if the market isnt doing well.
This is the best unless you have any inflexible, short term need to draw down funds. If so then you may choose bonds for stability but if course, that would sacrifice performance.
@@nemoretime7466 Yes, so I have now rebalanced into cash for income and dry powder. Treasuries seem expensive and their price will fall once tapering starts causing interest rates to rise, so I can’t bring myself to buy them.
I do the same. Being employed and a net saver I feel I need more business risk (equities) rather than stable cash flows. Furthermore, govt bonds these days provide returns which I am not sure are sufficient for the duration risk, while at the same time global equities were overall less volatile than usual. While in retirement I will probably keep a cash allocation to live off, and the rest all in diversified equities.
New viewer - I don't rebalance my portfolio any more. That applies to both pre-tax and post-tax retirement accounts. I let it drift...never knew that Mr Bogle said that it was ok (under the right circumstances).
Bogle also said one should (as a rule of thumb) have bond allocation that match one’s age. How does he take both positions without rebalancing? Is it that he changes allocation as he contributes over time?
Vanguard have research paper showing rebalancing annual all the way to daily doesn’t have material difference, so annual rebalance ain’t no “end of the world” in fact it’s most efficient.
The math behind this is obvious. Your Stock Portfolio (10%-13% APY) is gonna outperform your Bonds (3%-5%APY) by a tremendous amount. Once the "snowball" gets large enough, and your reinvested dividends begin to take off as well, you're going to be forces to pump larger, and larger amounts into the bonds just for them to keep up with the ratio. That's money you AREN'T able to pump into the stocks, which causes you to give up lots of potential gains.
Don't rebalance if your investment is super long-term and all around index fund. Otherwise if you started to invest in your late 30s and 40s for your retirement, you definitely should rebalance esp, if you are investing in tech sector asset as of 2024 right now, minimizing risk. Timeframe of investing would indicate that you should rebalance or not.
If you are constantly investing ie adding money to the portfolio on a constant basis, then rebalancing is the only way to implement dollar cost averaging (closest thing to buy low on the stock market).🤔
Good video, thanks. I like that you provide links to some of the documentation. If an asset class becomes a greater portion of your portfolio, that is good news, the asset class is working for you. Stocks are thought to be mean reverting, so rebalancing between equity asset classes may be beneficial. Fixed income investments are not mean reverting and generally produce a lower return compared to equity. Consequently, rebalancing to fixed income will only reduce your total return further. If you had a bank account that paid 3% to 8% but over time you had a return of 6%. Your other bank account is very steady, and always pays 4.5%. Your 6% account will grow larger than your 4.5% account, true. When the difference reaches a certain percent, why would you transfer money from your 6% account to your 4.5% account?
I prefer to rebalance by having all dividends paid in cash and not auto-reinvested. Then I, on a monthly basis, go through my holdings and add to the top 10 most under valued as compared to the entire pool of investments. Seems to work out ok for the most part as over time various stocks move in and out of my top 10 screen.
If you think stocks will give you a better return then go 100% stocks. If you have a different target allocation e.g. 70/30 because that is the risk you are hapy with then you need to rebalance to keep that risk profile. Otherwise you are just drifting into a different risk profile.
When I make my monthly contribution I just decide how much money I want to put into each category to reduce certain the need to sell something to rebalance the portfolio.
You don't rebalance or diversify to increase returns, you do it to protect against downside risk, especially major events. Everyone thinks that because the last 10 years have largely been a moonshot for the markets, that we won't ever see 1929, 1973-4, 1987, or 2008-9 again. Having lived through three of those, I'm highly sensitive to what can go wrong and how quickly that can happen. Oh, yeah, and everyone has made a ton of money in the last 10 years because of the rising tide effect, so everyone thinks that they have the magic Midas touch and magic formula, when they've just been along for the ride.
In later years, Mr. Bogle was interviewed about how to determine asset allocation. He very plainly stated that although an investor should never be entirely out of the market, there are times when either external (i.e. market) conditions, or an investor's personal situation (health, age, family) can point to a path of adjusting the stock/bond percentage in his or her portfolio -- and noted the times in his life when he did this, and why. It's all right here: th-cam.com/video/oJynLAvzccc/w-d-xo.html
I don‘t get the concept of selling winners unless you’re nearing retirement age. While your portfolio is growing in the accumulation phase why not do a soft rebalancing through contributions instead?
In a taxable account, why not simply contribute more toward the lagging security (stock/bond etf/mutual fund) until rebalance achieved? Would this create unforeseen problems? It would certainly take longer, but it would also avoid potential taxes in a taxable account.
Certainly an approach I've used, but in a really bad market, you contributions might not be near enough to get back to your target allocation any time soon.
Great idea. I do that with my retirement portfolio. Its based on the idea that "my best performing investment this year will not be my best next year." I don't want to be guessing what will be hot next year.
Downloaded and started to pop in my 401k elections here and found, frustratingly, that not all company 401k plans have a ticker symbol. ex. T. Rowe Price Blue Chip Growth T6, US Extended Equity Market Indx, etc... This spreadsheet was what I have been looking for but looks like I am back to manual entry instead of leveraging the google finance lookup features you built in. Ugh
when that happens I just look for fund (listed in the program) that is similar and has a history of returns that mirror the fund i have that is not in the program
Question: say you have 4 different allocations, if one of those funds becomes necessary to rebalance, how do you determine which of the other funds to move it to?
Great video rob, I’m currently dealing with my taxable account and still not sure how I want to handle this. Among other things related to a taxable account. Do you have a video on what you hold in your taxable account and how you plan on using it in retirement? Would love more insight when it comes to the taxable account.
When rebalancing does it matter on how high or low you change the percentage. Say o have 80 percent of my portfolio balance in one stock. Would it be bad to change tbat to 30 percent at once. Or how should I do that it’s a company 401k plan
Sounds reasonable. You are retired and taking 5% each year. Sell whatever asset you have with the highest market value. That asset drops from position #1. Next year do the same. Your are rebalancing with annual redemptions.
@Rob Berger, Thank you again for the great content! Do you recommend to apply 80/20 (IE) to each of accounts like taxable, differed taxable, and tax free accounts? thanks
If you like the 80/20 mix, it applies to the total of all accounts. The taxed deferred account allows you to sell equities and buy fixed-income securities without any income tax consequences.
Well, you could use a tool like Personal Capital or Morningstar to track your asset allocation. When it deviates by whatever rebalancing band you've chosen, it's time to rebalance.
I typically Re-balance when CD's are near the Dividend % of Stocks and start building Ladders. Right now as my 10 year ladder of CD's Mature, I am going back to Dividend Paying Stocks.
Great video rob. Can you do a portfolio breakdown of the Hedgefundie strategy as seen on the Bogleheads forum? It consists of 55% allocation of UPRO and 45% TMF rebalancing quarterly. Thanks
Thanks for the video! Great to learn different concepts on rebalancing! When rebalancing, should I include both taxable and non-taxable account into the calculation as a whole, especially in relation to early retirement planning? If that’s the case, should the balance percentages be applied inside each account as well?
I look at asset allocation and rebalancing across all of my accounts. I try to rebalance as much as possible inside retirement accounts to avoid the tax hit. For that reason, I spread asset classes across both taxable and retirement accounts where possible (except for REITs--always in retirement accounts--and munis--always in taxable accounts).
Starting out 60/40 and letting it drift to 90/10 sounds basically like a natural bond tent. Seems like a sound strategy to me. I agree with Bogle. Rebalancing is a waste of time.
Commodities are not stock like. They have 0 cashflow 😂 exactly the opposite kind of asset from both stocks and bonds! Stocks are the future cashflows of a company, bonds are future cashflows from a contract. In fact we whould expect commodities to have negative real returns due to the advancement of technology with both the better creation-mineing of them and the replacement of them when there's high demand and that value goes to the stocks of the companies with the inovations
I always thought the concept of rebalancing is stupid and I dont see the purpose of buying bonds either, makes no sense to me, If you cant handel risk you shouldnt be in the market
Moving money from your better-performing sectors to your poorer-performing sectors makes no sense to me. There is no assurance that the poorer-performing sectors will ever outperform.
Rebalancing is timing the market. Period. End of discussion. No? Explain your strategy with out using the word “when”. That’s the “tell”, you have an automatic mechanism tied to market performance. THAT IS REBALANCING!!! THAT IS TIMING THE MARKET!!!
Yes, if you are making a concisos decision of the "when" then you are timing. If you religiously do the rebalancing on a fixed, say quarterly or annual basis, then no.
Join the newsletter: robberger.com/newsletter/?TH-camr&ATF+Link&Newsletter
When this market crashes 90% you won't need to rebalance.
Hey @rob_berger. Thanks for your work. I was revisiting this video and had an idea.
In addition to (or possible without) the opportunistic rebalance method, what do you think about using new contributions as a balancing mechanism? For example, if the portfolio balance is off by more than the contribution amount, simply contribute to the "low" category(s) of the portfolio to bring them towards the target. If the new contribution is more than the deficit, then make up the deficit first and then spread the remaining contribution according to target allocation.
Is seems like an approach like this would have you always investing on the value side, while also minimizing the sale of whatever assets are running up at that time. (Let them RUN!!!) This would also reduce the frequency and/or amount of any kind of rebalancing - regardless of method. I know it's a little more math than the average person wants to do, but that math does not deter me in the least.
Thoughts? (or maybe a future video idea?)
Watching in my 40s... And only just starting investing I feel so behind!
Gotta start somewhere
Keep going bud I started at 41... was in 7K debt and living in my overdraft. I'm now debt free have a 15K emergency fund. 20K saving pot and just surpassed ~$100K in my portfolio. Diversification and consistency is key... I am almost 43 now!
I lost a lot chasing individual stocks and I feel pretty silly for not understanding how investing works. I have a double major in economics but I’ve been trying to make sense of the market. Well done on profits!
You still have time , keep on dca into your asset of choice.
Great advice here. Keep it simple, buy things you understand, take some risk but don't try to shoot the lights out. I’m invested in ETFs, REITs, and individual stocks and use a CFA. On average, she takes 10% of earnings, but using *Lina Dineikiene's* system allows for a more hands-off approach. I conservatively follow her recommendations and market entry and exit points, and tbh this makes it fairly simple for me... I make more money with way less headaches:-)
Read Jack Bogle’s book on index funds back in the mid 1990’s. Put just 10% of my annual income in index funds and never looked back, never rebalanced. Retired this year with a portfolio of 2 million in my 403b. Thank you Jack Bogle
Congrats, If I had known this earlier in my life.
Well done, Sir. I'm a big fan of these conservative strategies. Especially as the inefficient markets become less and less common. Indexing is the way to go for the long-term. I enjoy watching Howard Marks also, another successful investor. Very conservative, makes a great argument against trying to beat markets.
This is a very solid investment channel. Its a pleasure listening to Rob. I was looking for some content on rebalancing for my all stock portfolio and here it is, with backing research and all.
This discussion is why I like what M1 does. Set your target allocation and as you make contributions they are directed toward assets that are below the target percentage. This of course is not helpful once you are no longer contributing, but for those of us still accumulating, it is a huge help if you care about your asset allocation.
I agree with Jack, right into retirement. As far as risk is concerned, do not look at %. Rather, consider how much you need to live on for around 2years, to minimize stock withdrawals when stock market tanks.
I don't have a head for business or numbers, yet I find myself learning from Rob in a way that surprises me.
I don't think to rebalance is for more returns. To compare returns, in this case, proves anything at all. Rebalancing is more for risk management. Max drawdown is the real factor we should be looking at. Then, there are different ways to rebalance your portfolio. Unless you retired already, you should save and invest on a regular basis. That is how you want to rebalance. Simply put more money towards the lower parts you want to add.
I just read you book, and gave bought 3 more for my siblings. Such a great book for newbies packed with directions! Right after reading it I was able to create my Vanguard Target-Date fund using my Roth IRA as my employer do not offer 401K. I am also trying to max out my HSA contribution. Appreciate the guidance and can't be more excited for my journey as an investor here in the US. P.S. I am a new immigrant with prior investing experience in the Philippines.
I rebalance quarterly, but also keep an eye on things monthly. During COVID, I did a lot of opportunistic rebalancing. The main thing I watch is the Fear-Greed index. As long as the needle stays near the middle, the less opportunity there will be. When the needle swings, I look for which asset class is on sale.
I rebalance through contributions.
I get where Jack is coming from: your buckets will rise and fall naturally, so don't mess with them. Perhaps rather than rebalancing the portfolio, one should rebalance one's monthly contributions so that the bucket that's doing well doesn't become over-weighted. Put more into the one doing not-so-well so you can buy into them at a discount.
Great point
100%
So what happens if the "bad" part of your portfolio is going down because the stocks in it are a bunch of perennial losers on their way to absolute zero?
Wouldn't that be throw good money after bad?
@@ArmageddonIsHere He is referring to indexes, not individual stocks.
I've seen that. I didn't rebalance my original investments for my 401k and it grew very well, now that I've rebalanced it actually slowed growth can also see it on testfolio.
I Have kept a 65/35 portfolio for most of my adult life. When the market crashes (as sooner or later it does) i move 2 to 5 percent into stock index funds at a predetermined rate. Such as stocks down 10 % then 2 percent to the index fund. if down 30 % or more i bump up the 5 % more from bonds into stocks. DId well in 2009 and 2020 and 2022. When mkt bounces back i rebalance back to 65/35. Would love to see a historical study on this method.
You are so clear and helpful. Thank you!
I love your videos. Leaning a lot from them.
Thank you so much for this video. I have been running the numbers and was beginning to question the rebalancing strategy myself. It is so good to see I was on the right track! Now - whether I will be able to put most of my retirement savings in bonds and never rebalance, we shall see!
Watching this again, a year after I first watched. Thank you again for this.
Jack Bogle is a G.O.A.T
Your awesome, Mr bogle was a legend
Jack Bogle and Warren Buffett have been my North stars throughout my saving and investing. Amazing advice always delivered in clear and easy to understand language.
I just rewatched your terrific video against the Bucket Strategy. I can’t wait to watch this one. Outstanding!
I have been 100% stocks most of the time with an unbalanced buy and hold portfolio. I received income from employment so did not need bonds which produce a poor return and lose their value whenever inflation increases. Spare savings going into whatever regional equities seem cheap. Have I been doing it all wrong?
It kind of depends on a persons age. Somebody closer to retirement or retired should have safer investments that they can sell if they need money especially if the market isnt doing well.
This is the best unless you have any inflexible, short term need to draw down funds. If so then you may choose bonds for stability but if course, that would sacrifice performance.
@@nemoretime7466
Yes, so I have now rebalanced into cash for income and dry powder. Treasuries seem expensive and their price will fall once tapering starts causing interest rates to rise, so I can’t bring myself to buy them.
I do the same. Being employed and a net saver I feel I need more business risk (equities) rather than stable cash flows. Furthermore, govt bonds these days provide returns which I am not sure are sufficient for the duration risk, while at the same time global equities were overall less volatile than usual. While in retirement I will probably keep a cash allocation to live off, and the rest all in diversified equities.
@@blakejohnson3864 so true
I started investing in march. I always thought rebalancing meant using your contributions to balance.
That will work. At some time in the future, you will no longer be buying. Then it will be sell something and buy something else.
Really enjoy and appreciate your videos. Thanks for taking the time to share your experience!
Always great information, thank you
in rebalance i made a fortunate / need to check always on opportunities !!!! awesome video
Good info for simple guy with 2 fund 60/40 . .thanks!
New viewer - I don't rebalance my portfolio any more. That applies to both pre-tax and post-tax retirement accounts. I let it drift...never knew that Mr Bogle said that it was ok (under the right circumstances).
Bogle also said one should (as a rule of thumb) have bond allocation that match one’s age. How does he take both positions without rebalancing? Is it that he changes allocation as he contributes over time?
Vanguard have research paper showing rebalancing annual all the way to daily doesn’t have material difference, so annual rebalance ain’t no “end of the world” in fact it’s most efficient.
Great advice, you have a lot of great insight!
The math behind this is obvious. Your Stock Portfolio (10%-13% APY) is gonna outperform your Bonds (3%-5%APY) by a tremendous amount. Once the "snowball" gets large enough, and your reinvested dividends begin to take off as well, you're going to be forces to pump larger, and larger amounts into the bonds just for them to keep up with the ratio. That's money you AREN'T able to pump into the stocks, which causes you to give up lots of potential gains.
Good one thank you
Don't rebalance if your investment is super long-term and all around index fund. Otherwise if you started to invest in your late 30s and 40s for your retirement, you definitely should rebalance esp, if you are investing in tech sector asset as of 2024 right now, minimizing risk. Timeframe of investing would indicate that you should rebalance or not.
Hello Rob, I just discovered your channel and you work. Your explanations are very clear, congrats. Looking forward to watching your other videos.
If you are constantly investing ie adding money to the portfolio on a constant basis, then rebalancing is the only way to implement dollar cost averaging (closest thing to buy low on the stock market).🤔
Great job on explaining rebalance ratios
Good video, thanks. I like that you provide links to some of the documentation. If an asset class becomes a greater portion of your portfolio, that is good news, the asset class is working for you. Stocks are thought to be mean reverting, so rebalancing between equity asset classes may be beneficial. Fixed income investments are not mean reverting and generally produce a lower return compared to equity. Consequently, rebalancing to fixed income will only reduce your total return further. If you had a bank account that paid 3% to 8% but over time you had a return of 6%. Your other bank account is very steady, and always pays 4.5%. Your 6% account will grow larger than your 4.5% account, true. When the difference reaches a certain percent, why would you transfer money from your 6% account to your 4.5% account?
I finally understand the mindset behind rebalancing. Thanks Rob.
I prefer to rebalance by having all dividends paid in cash and not auto-reinvested. Then I, on a monthly basis, go through my holdings and add to the top 10 most under valued as compared to the entire pool of investments. Seems to work out ok for the most part as over time various stocks move in and out of my top 10 screen.
M1 Finance does it for me. Buys undervalued holdings first until they reach their targeted percentage.
seems ok but i only want to rebalance annually to save me work
If you think stocks will give you a better return then go 100% stocks. If you have a different target allocation e.g. 70/30 because that is the risk you are hapy with then you need to rebalance to keep that risk profile. Otherwise you are just drifting into a different risk profile.
When I make my monthly contribution I just decide how much money I want to put into each category to reduce certain the need to sell something to rebalance the portfolio.
You don't rebalance or diversify to increase returns, you do it to protect against downside risk, especially major events. Everyone thinks that because the last 10 years have largely been a moonshot for the markets, that we won't ever see 1929, 1973-4, 1987, or 2008-9 again. Having lived through three of those, I'm highly sensitive to what can go wrong and how quickly that can happen. Oh, yeah, and everyone has made a ton of money in the last 10 years because of the rising tide effect, so everyone thinks that they have the magic Midas touch and magic formula, when they've just been along for the ride.
In later years, Mr. Bogle was interviewed about how to determine asset allocation. He very plainly stated that although an investor should never be entirely out of the market, there are times when either external (i.e. market) conditions, or an investor's personal situation (health, age, family) can point to a path of adjusting the stock/bond percentage in his or her portfolio -- and noted the times in his life when he did this, and why. It's all right here: th-cam.com/video/oJynLAvzccc/w-d-xo.html
Great Video!
I don‘t get the concept of selling winners unless you’re nearing retirement age. While
your portfolio is growing in the accumulation phase why not do a soft rebalancing through contributions instead?
What about just putting it in a balance index fund.
In a taxable account, why not simply contribute more toward the lagging security (stock/bond etf/mutual fund) until rebalance achieved? Would this create unforeseen problems? It would certainly take longer, but it would also avoid potential taxes in a taxable account.
Certainly an approach I've used, but in a really bad market, you contributions might not be near enough to get back to your target allocation any time soon.
Great idea. I do that with my retirement portfolio. Its based on the idea that "my best performing investment this year will not be my best next year." I don't want to be guessing what will be hot next year.
Downloaded and started to pop in my 401k elections here and found, frustratingly, that not all company 401k plans have a ticker symbol. ex. T. Rowe Price Blue Chip Growth T6, US Extended Equity Market Indx, etc... This spreadsheet was what I have been looking for but looks like I am back to manual entry instead of leveraging the google finance lookup features you built in. Ugh
when that happens I just look for fund (listed in the program) that is similar and has a history of returns that mirror the fund i have that is not in the program
Nice video.
I rebalance once per year in my IRA because I'm not taxed. For taxable accounts, I don't rebalance.
The trick to avoid rebalancing taxes is to keep some of everything in your tax sheltered account, and rebalance there. But that takes some planning.
Question: say you have 4 different allocations, if one of those funds becomes necessary to rebalance, how do you determine which of the other funds to move it to?
what if I don't sell my high performers but instead allocate my new money to laggards to do the rebalancing? How does that sound?
Great analysis Rob. Very interesting topic.
Looking forward to your research on the Pfau/Kitces "Rising Equity Glide Path"
Hi great video! like to know if the both stock and bond together move lower and hit the band, lowering overall porfolio, do we still rebalance?
Great video rob, I’m currently dealing with my taxable account and still not sure how I want to handle this. Among other things related to a taxable account.
Do you have a video on what you hold in your taxable account and how you plan on using it in retirement? Would love more insight when it comes to the taxable account.
For a Roth IRA would the opportunistic strategy be optimal, considering that withdrawal ( on time) are tax free?
When rebalancing does it matter on how high or low you change the percentage. Say o have 80 percent of my portfolio balance in one stock. Would it be bad to change tbat to 30 percent at once. Or how should I do that it’s a company 401k plan
Sounds reasonable. You are retired and taking 5% each year. Sell whatever asset you have with the highest market value. That asset drops from position #1. Next year do the same. Your are rebalancing with annual redemptions.
@Rob Berger,
Thank you again for the great content! Do you recommend to apply 80/20 (IE) to each of accounts like taxable, differed taxable, and tax free accounts? thanks
If you like the 80/20 mix, it applies to the total of all accounts. The taxed deferred account allows you to sell equities and buy fixed-income securities without any income tax consequences.
Why not just purchase more bonds to balance and not sell stocks?
great video - thanks! -however not everyone has an "accountant" mind - I do not "do well" looking at spreadsheets - any alternative? thanks
Well, you could use a tool like Personal Capital or Morningstar to track your asset allocation. When it deviates by whatever rebalancing band you've chosen, it's time to rebalance.
Don't cut the flowers to water the weeds!
I found your video on opportunistic rebalancing made so much sense, thank you.
Am I able to get a copy of the spreadsheet you demonstrated?
Best
David
A link to the newsletter is right below the video.
I typically Re-balance when CD's are near the Dividend % of Stocks and start building Ladders. Right now as my 10 year ladder of CD's Mature, I am going back to Dividend Paying Stocks.
Bogle rebalanced because he kept a 50/50 asset allocation from 2001 to the day he died on Jan. 16th, 2019.
Great video rob. Can you do a portfolio breakdown of the Hedgefundie strategy as seen on the Bogleheads forum? It consists of 55% allocation of UPRO and 45% TMF rebalancing quarterly. Thanks
Brand new to your channel. I’m wondering if you’ve explained in a prior video on how to use Portfolio Visualizer?
Not in great detail, so I'll add it to my list of upcoming videos. Thanks.
Do you get taxed if you rebalance within an IRA ETF portfolio?
Nope.
You don't get taxed within a retirement account until it comes out of the account. After you're 59.5 you don't get taxed at all on Roth withdrawals
Thanks for the video! Great to learn different concepts on rebalancing! When rebalancing, should I include both taxable and non-taxable account into the calculation as a whole, especially in relation to early retirement planning? If that’s the case, should the balance percentages be applied inside each account as well?
I look at asset allocation and rebalancing across all of my accounts. I try to rebalance as much as possible inside retirement accounts to avoid the tax hit. For that reason, I spread asset classes across both taxable and retirement accounts where possible (except for REITs--always in retirement accounts--and munis--always in taxable accounts).
@@rob_berger Thanks for the tips!
No need to rebalance when your 95/5 ! Let it ride until your 55
Sounds simple stupid in an IRA if you don,t need the money. I have Wellington down now 11% but, I can weather the storm.
Starting out 60/40 and letting it drift to 90/10 sounds basically like a natural bond tent. Seems like a sound strategy to me.
I agree with Bogle. Rebalancing is a waste of time.
Commodities are not stock like. They have 0 cashflow 😂 exactly the opposite kind of asset from both stocks and bonds! Stocks are the future cashflows of a company, bonds are future cashflows from a contract. In fact we whould expect commodities to have negative real returns due to the advancement of technology with both the better creation-mineing of them and the replacement of them when there's high demand and that value goes to the stocks of the companies with the inovations
I always thought the concept of rebalancing is stupid and I dont see the purpose of buying bonds either, makes no sense to me, If you cant handel risk you shouldnt be in the market
Also I should add that volatility does not equal risk
Moving money from your better-performing sectors to your poorer-performing sectors makes no sense to me. There is no assurance that the poorer-performing sectors will ever outperform.
Please rebalance that lamp shade…
Rebalancing is timing the market. Period. End of discussion. No? Explain your strategy with out using the word “when”. That’s the “tell”, you have an automatic mechanism tied to market performance. THAT IS REBALANCING!!! THAT IS TIMING THE MARKET!!!
Yes, if you are making a concisos decision of the "when" then you are timing. If you religiously do the rebalancing on a fixed, say quarterly or annual basis, then no.