I noted in my investment policy to rebalance with new contributions in the beginning of each year.
With the stock market up, I’m finding myself on my third non contribution month into stocks and if the market stays this way, I’ll have another 3 months building up cash.
This is beginning to feel like waiting for a market crash.
At the same time, I have not contributed more during down times because they didn’t happen around the new year, so I feel kind of weird about this too now.
Anyone in the same boat at the moment or in the past? What is / has been your experience?
I started a thread about that, in a way. Throw your money in a robo advisor with etf and cash allocation you like and never think about it again. All weather portfolio perfect match tool, for rebalancing, with like 4 or 5 products max.
I think I remember that thread.
I’m happy with some hands on and not interested in a robo advisor, so that’s out.
Constant rebalancing retrospectively has an inferior outcome than more infrequent rebalancing so that’s not a good solution for me neither.
Maybe I’d do better with upper and lower guardrails to trigger rebalancing than with a time based approach.
It would still feel like market timing but at least I’d also be timing the bear markets…
Actually, with a 7% return on stocks, if it were constant over time, one might never invest if one’s monthly investments would be lower than about 0.6% of one’s stock worth… Depending on asset allocation of course…
Yes, back in June 2024 I came up with the idea that I’d gained the gains for the year, and admittedly the noise about impending dooooom got to me so I stacked cash for 6 months, then bought gold with it around January, then sold all the gold to buy stocks near the bottom of the April 2025 debacle.
The experience was that of having a great and constant itch to spend that saved cash/gold which didn’t do me any good in terms of mental health, but I found out I don’t feel good about negative carry/no cashflow investments so that’s a valuable lesson.
I don’t know the data, some simple backtesting I did told me that annual rebalancing seems to yield the best results, but I am sure you and others here know it better than me.
By guardrails do you mean something like what I wrote above “I decided I gained all the gains for the year”? What I wrote was crude, what I meant was that I thought “if I’d set a target of say 7% gains per year then I can stop contributing and pile cash up”, then I found out this is an actual strategy (value averaging). Don’t know the data for that either, but it made conceptual sense to me, and the additional reasoning was that my existing principal was much bigger than my monthly contributions, so nothing can go wrong (ie it either goes up more than I can contribute, or it goes down and I buy more with the saved cash). In the end it didn’t go wrong but I decided to only trade TQQQ going forward, and just keeping buying with the rest.
YES, exactly! I came to that idea too…and considered that with my current saving rate I could theoretically stop investing around 300k and then let it do its thing. Reality of course isn’t anything like that because we get both the +30% and the -30% years.
Dunno, someone smarter than me has certainly modelled what worked best in the past, rebalancing vs upper and lower guardrails. Will you also be selling if your upper guardrail is broken, though? Value averaging would say you should do, I know I would struggle to bring myself to do that, hence this strategy wouldn’t work for me. Adding a specific time for rebalancing would be easier emotionally.
@gaijin not really. I’m not stopping investing because I’m afraid the market might crash, I’ve been stopping because my asset allocation is out of balance at a time where I’m supposed to rebalance to get it back to my asset allocation goal. (And my strategy to get back to my regular allocation is with new savings.)
…I have already shared my opinion on the thread actually
Thats how it is, its part of the game. The longest period if I remember correctly was about 3.5 years, where all my investments directly went into Cash. Thats what happens when both your investments are relatively large (compared to new contributions) and when the Stock market goes balistic.
Trust me, one day or another, you will redeploy this cash into shares. Its just how the game is played…
Just continue your strategy, ots the right way. Even of it feels silly…
Ah yes, hard and enforced re-balancing is not a good idea (unless you do it staggered over 5 years or so). You do exactly the right thing…
OK, I might have misinterpreted the title of the thread then.
To me, everything not following the investment policy without changing the policy feels like market timing. And at this point market timing is expecting a crash. But maybe that’s too simplistic.
Btw, my logic is that I keep rebalancing with investments/withdrawals only, as long as either investments or withdrawals exceed my SWR. Which happens to be 3.25% for my calculations.
The implication on my 60/40 is that when stocks go up by 10%, i need about 1.5 years to get them back to 60/40. Thatvsounds about right to me, from the „letting profits run“ point of view. Clearly, with stocks going up 10% year after year, you are somewhen a bit too high on shares. But at the same times: I want to ride the trend up and at the same time, I should still not end too far from my 60/40 target.
Of course, not rebalancing at all would also be an option.
Maybe I need to accept that rebalancing is some kind of market timing. One has to somewhat believe in market valuations and taking gains off the table and fight the FOMO of not investing while valuations go up.
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Depending on asset allocation of course…