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First, you would be negligent if you allowed a fund to go down 40%. Unless it happened all in one day (unlikely), you should have sold it much earlier. So resolve to pay attention and not let this happen. Look at the 21 day moving average for guidance.

Second, there are times (not now) when it is a good thing to be out of the market entirely. Take a look at timing cube ( for an example. But it is relatively easy to do your own timing.

Finally, asset allocation is bunk. Instead of being in a bit of everything, be in the sectors of the market that are moving up. Then dump those sectors when something else looks better. There are people who have done quite well trading sector funds - moving into the ones that are performing well, and then trading them for others if those sectors begin to falter.

So do not rebalance. Trade intelligently.
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