Rebalance Regularly, Even During Periods Of Volatility I usually rebalance the major areas (cash, bonds, stocks & other assets) of my portfolio when one of them gets to be plus or minus five percent form it's target with the exception being cash.
Example. My current target allocation to equities is 50%. With this, should equities rise to above 52.5% (105% of it's target) during a normal market cycle then I'll trim equities. However, if we are in a seasonal trend then I'll, at times, delay the rebalance towards the end of the seasonal cycle usually following some technicals looking for a breakdown in the trend. With this, I can either rebalance by the calendar or anytime by a break down in the trend. Should equities reach their upper limit within their asset allocation (currently set at 55%) then this requires a rebalance back to at least the 52.5% level and when the seasonal strategy concludes I'll generally rebalance back to the traget allocation of 50% unless equities are selling at a low price to earnings multiple and I'll position towards their mid to high allocation range for me.
Generally, if stocks are selling at a high price to earnings ratio valuation then I'll position towards the low end of my allocation range (45%) and if they are selling at a low price to earnings ratio valuation then I'll position towards my high allocation range (55%).
I am thinking there are many triggers that can warrant a rebalance incuding a need for cash. The above are just a couple of the things that can trigger a rebalance for me with most of them being driven by both stock and bond market valuations. In addition, I'll generally buy major downdrafts in the stock market and sell some equities off as the market recovers keeping within my allowable asset allocation range.
I call this working within one's asset allocation and somewhat follows Biblical beliefs in there is a time to plant and a time to harvest. Through the years this strategy has worked well for me.
Below is a description of my sleeve management system along with my portfolio's configuration. Note, there has been some recent fund movement within the sleeves.
Old_Skeet's Sleeve Management System (02/26/2016)
Here is a brief description of my sleeve system which I organized to help better manage the investments that were held in five accounts along with my current positioning. The accounts consist of a taxable account, a self directed ira account, a 401k account, a profit sharing account and a health savings account plus two bank accounts. With this I came up with four investment areas. They are a cash area which consist of two sleeves … an investment cash sleeve and a demand cash sleeve. The next area is the income area which consists of two sleeves. … a fixed income sleeve and a hybrid income sleeve. Then there is the growth & income area which has more risk associated with it than the income area and it consist of four sleeves … a global equity sleeve, a global hybrid sleeve, a domestic equity sleeve and a domestic hybrid sleeve. An finally there is the growth area, where the most risk in the portfolio is found and it consist of five sleeves … a global sleeve, a large/mid cap sleeve, a small/mid cap sleeve, a specialty & theme sleeve along with a ballast & spiff investment sleeve. Each sleeve consists of three to six funds (in most cases) with the size and the weight of each sleeve can easily be adjusted, from time-to-time, by adjusting the number of funds and amounts held. By using the sleeve system one can get a better picture of their overall investment picture and weightings by sleeve and area. In addition, I have found it beneficial to xray each fund, each sleeve, each investment area, and the portfolio as a whole quarterly. Again, weightings can be adjusted form time-to-time as to how I might be reading the markets and wish to weight accordingly. All funds pay their distributions to the cash area of the portfolio with the exception being those in my 401k, profit sharing, and health savings accounts where reinvestment occurs. With the other accounts paying to the cash area builds the cash area of the portfolio to meet the portfolio’s monthly cash disbursement amount with the residual being left for new investment opportunity. In addition, most all buy/sell trades settle from or to the cash area with some nav exchanges between funds taking place.
Here is how I have my asset allocation broken out in percent ranges, by area. My current target allocations are cash 20%, income 30%, growth & income 35%, and growth 15%. I do an Instant Xray analysis on the portfolio quarterly (sometimes monthly) and make asset weighting adjustments as I feel warranted based upon my assessment of the market, my risk tolerance, cash needs, etc. Currently, I am about 20% in the cash area, 30% in the income area, 35% in the growth & income area and 15% in the growth area. When a rebalance is warranted I'll trim first from the ballast & spiff sleeve.
Cash Area (Weighting Range 15% to 25% with target being 20%)
Demand Cash Sleeve… (Cash Distribution Accrual & Future Investment Accrual)
Investment Cash Sleeve … (Savings & Time Deposits)
Income Area (Weighting Range 25% to 35% with target being 30%)
Fixed Income Sleeve: GIFAX, LALDX, THIFX, LBNDX, NEFZX & TSIAX
Hybrid Income Sleeve: CAPAX, CTFAX, FKINX, ISFAX, JNBAX & PGBAX
Growth & Income Area (Weighting Range 30% to 40% with target being 35%)
Global Equity Sleeve: CWGIX, DEQAX & EADIX
Global Hybrid Sleeve: BAICX, CAIBX & TIBAX
Domestic Equity Sleeve: ANCFX, FDSAX, INUTX, NBHAX, SPQAX & SVAAX
Domestic Hybrid Sleeve: ABALX, AMECX, DDIAX, FRINX, HWIAX & LABFX
Growth Area (Weighting Range 10% to 20% with target being 15%)
Global Sleeve: ANWPX, PGROX & THOAX
Large/Mid Cap Sleeve: AGTHX, IACLX & SPECX
Small/Mid Cap Sleeve: AJVAX, PCVAX & PMDAX
Specialty & Theme Sleeve: LPEFX, PGUAX, TOLLX, NEWFX & THDAX
Ballast & Spiff Sleeve: FISCX, VADAX & VNVAX
Total Number of Mutual Fund Positions = 47
How I Blew It With A Smart-Beta Fund
muni reads
GLFOX - Lazard Global Listed Infrastructure Open, @Bee and others 65% giant and large-cap, with 55% of assets in top
10 holdings. Certainly not SMID and the concentration may give some pause. It has worked as a global holding for me as for
@puddnhead during a period when JOHAX, IWIRX and Grandeur Peak holdings in my accounts stank up the joint. I'm adding to GLFOX.
Q&A With Doug Ramsey, Co-Manager, Leuthold Core & Leuthold Global Fund Everyone should revisit the 73-74 bear market to see how vicious bear market rallies can be. Regardless, I try to keep my opinions and the opinions of others out of my trading decisions.
Edit: This bear market domestically seems to be all about energy. If oil prices can somehow reach and stabilize above $40 a barrel I wonder if the 2/11 may just be it.
Q&A With Doug Ramsey, Co-Manager, Leuthold Core & Leuthold Global Fund Doug Ramsey makes an important point about the Fed: Fed tightening started in 2014, and there have already been eight policy tightening moves, not the one the CNN pundits et al. recognize.
Q&A With Doug Ramsey, Co-Manager, Leuthold Core & Leuthold Global Fund A few highlights:
Expect the S&P 500 to bottom somewhere between 1600-1700. It's about 1950 now.
Given the length of this bear (going on 11 months) and the length of a normal bear, the bottom might occur this summer.
The worst of overvaluation has been squeezed out. We've gone from the second highest valuation to perfectly average in a bit over a year.
"On a smoothed-over basis, the S&P 500 is 19.5 times normalized earnings. The developed world ex-U.S. is 14.5, and emerging markets are 9.5. Europe has depressed valuations on depressed normalized earnings." Much of the risk from small caps is gone. Indeed, GMO projects small caps to return noticeably more than large caps in the next 5-7.
For what interest that holds,
David
Larry Swedroe: Does GMO Add Value For Investors? @expatsp: $
10,000,000
is the low minimum retail class for GMO, buddy. The share class minimums are $
10M, $50M, $
125M and $300M.
