Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (3) | Ignore Thread Prev Thread | Next Thread
Author: mrgoo Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 39314  
Subject: Rebalancing Date: 7/30/2012 6:42 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 0
Howdy

I practice a different version of rebalancing. Instead of taking a chunk of cash and investing it evenly over five different funds lets say you put 10 grand into each of the following funds: Vanguard Inflation-Protected Securities Fund (VIPSX), Vanguard REIT Index Fund Admiral Shares (VGSLX), Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX), Vanguard Total International Stock Index Fund Admiral Shares (VTIAX), Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX).
After a year you want to invest another 25 grand and want to get all funds back to 20% each. So you will be putting in more money into the “dogs” and less money in ones that have done well in the last year. You repeat this approach each year during your investing year in hopes of building an after tax portfolio.
My question are you really realizing the benefit of “gaining from the winners” over time since you are not selling or is this just a version of dollar cost averaging?

Thanks

Gary
Print the post Back To Top
Author: joelcorley Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39194 of 39314
Subject: Re: Rebalancing Date: 7/31/2012 1:16 AM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 3
mrgoo,

You wrote, My question are you really realizing the benefit of “gaining from the winners” over time since you are not selling or is this just a version of dollar cost averaging?

The concepts of rebalancing and dollar cost averaging are not mutually exclusive. Your proposed technique does both.

In fact, lots of people do it in their 401ks. They contribute on a regular basis and rebalance on a regular basis. You're just doing both at the same time.

Now whether or not those are good fund picks might be another issue ... though I happen to think it's a pretty reasonable selection.

- Joel

Print the post Back To Top
Author: CABob Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 39196 of 39314
Subject: Re: Rebalancing Date: 7/31/2012 12:00 PM
Post New | Post Reply | Reply Later | Create Poll Report this Post | Recommend it!
Recommendations: 3
It sounds like typical rebalancing to me except you are rebalancing with new money rather that moving money from one fund to another. Rebalancing with new money should be the first choice for anyone and an annual rebalance is certainly reasonable. And, yes, you are buying low and eventually selling high which is one of the advantages of rebalancing.
I might have other thoughts on your asset allocation, but, yours is certainly reasonable.

Bob

Print the post Back To Top
UnThreaded | Threaded | Whole Thread (3) | Ignore Thread Prev Thread | Next Thread
Advertisement