Non-Professional Opinions On When/If To Rebalance Investments To Take Advantage Of Down Markets

Financial advisors recommend not to try to time the markets but almost all of them recommend to rebalance to mitigate risks & loss in recessions. The all time high for the Dow Jones was 29,551 & the S&P was 3,393. A 20% drop in both would be 23,640 & 2,714. It looks like we will be below both -20% benchmarks that usually indicates a recession. After the feds dropped the interest rates last week my bond funds & ETFs shot up even higher. I lived through the Great Recession just fine & didn’t lose anything because I didn’t sell anything. Although I did make a killing by buying real estate really cheap I regret not buying more into the markets when they took historic drops. I have 5 years before retirement & hope to convert positive returning positions into falling funds to hopefully be in a up market in a couple of years. Any opinions on when to rebalance to take advantage of the fire-sale on Wall Street?

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The usual wisdom (which I’m sure you are aware) is by your age (about 60?) you should be mostly into safe things (like bonds). 100-age=bond%. So you ‘should’ be at 60% bonds and the rest in growth.

That said, if it were me I’d avoid making drastic rebalancing changes right now. If I had cash on hand I’d try to rebalance towards a 60/40 split without selling (unless I could sell negative capital gains to mitigate taxes then use that to rebalance).

I certainly wouldn’t try to time anything. You’re just too close to retirement in my opinion. Maybe if you were younger (and even then it’s not a good idea). While markets always go back up there’s no telling if they will go back up before you retire. Five years is too short.

Anyhow that’s my two cents.

Looks like the markets have tripped out on an over speed.

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If you had shorted oil and the market a few days ago, you would have done very well

Thanks for the advice but I’m not that old, mid 40’s. And after being a scared investor during '08-'09 crash I’m not as worried as I once was. Bonds were going up & will go down again when the feds raises interest rates. If we are encouraged to rebalance during booms, reducing potential growth, why shouldn’t we rebalance during busts to buy cheap? I’m not selling any dow or s&p tracked mutual funds/ETFs to take a lose. But I will sell utilities & bond funds/ETF’s if they continue to go up while the other markets go down. I just haven’t decided when. So far, every bust/recession has ended & most times it happens in less than a year or 2.

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There are inverse ETFs/ETNs that allow simple shorter of the market. But be careful as they are volatile. The market will keep going down. Buy the dip goons can’t do math. But there are plenty of options to make money on the way DOWN too.

Quick good video with one guy’s opinion.

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You don’t lose in a down market unless you sell. This market now is a doozy. Stay the course. Just one mans opinion, Stay with good quality dividend paying stocks in your portfolio. Have a few supposedly high flyers in the mix They may go up, they may go down, but most will still pay a decent amount of cash compared to most if not all banks. I do have some credit union CD’s… NOT bank CD’s as a cushion. My strategy for the last 40 yrs or so. No matter what,everyone has to pay their power,water,and telephone bill. Be diversified. One brick at a time. The tortoise did beat the hare. No Guru here, but works for me.One other well learned mistake, never, EVER put more than 10% of your portfolio in your own company stock, matching or not… They go down, you go down with them.

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I asked this question in the pre-market hours of Monday the 9th. I got some of my answer on Wednesday & especially on Thursday when the Dow, Russel & S&P took their greatest hits ever. When investing I very seldom jump in all at once. I decided to liquidate some of my bond funds & all of my municipal bonds that had positive 1Y returns. So I didn’t take a annual return loss & guess I made 2-4%. I’m dealing with mutual funds in my 401K & in my Rollover IRA’s so I don’t know the exact sell or buy price until after closing. I didn’t buy on Tuesday because the markets were up the whole day but I reinvested 25% when I seen them way down on Wednesday. Thursday was bittersweet because I was ecstatic when I seen all markets historically down but I wished I wouldn’t have bought in on Wednesday. I should have waited a day. On Thursday when my coworkers were cursing their phones because their accounts took such big hits I happily rebalanced 50% +/- of what I had to invest. I still have 25% of my previous bond money to put into stocks & I’m hoping for another big negative close for the Dow & S&P this week. I only rebalance once every 10-12 months so after I reinvest this last bit I’ll be locked in again. Hopefully it bounces back in a year like it did in '09. It would be awesome to make a 20% annual return. If not, no big deal because I still have a way to go before retirement.

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I’m in full agreement with the CD’s at the credit union. We keep most of our emergency fund money in CD’s. We keep them in amounts of $3,000 because that should be our monthly budget in retirement. Hopefully in retirement we won’t use the 4% Rule. Just put $3,000 from our investment returns & any part time work income in a new CD every month & hopefully stay 12-18 months ahead of any market fluctuations.

One of my favorite quotes from a financial podcast that I like is this, “If all of your investments are doing great then you aren’t properly diversified.” Every year I rebalanced out of funds that were doing great into funds that were only doing good. It was really hard to do because I wanted all of that money to make 7-15% & not the 3-7% that the more conservative funds were returning. That was one hell of a bull market too. But I think the turtle investing approach paid off last week. The crash that everyone knew was coming is here & I’m more optimistic than ever.

  1. The traditional stock/bond mix is most likely obsolete. Unless you think interest rates are going to stay low forever you should probably carry more stock. I think that dividend stocks can carry some of the “bond load.” I do like the muni funds however. At least they pay a little.

  2. Nothing wrong with buying when the stocks are on sale. If you have dry powder go for it. Market timing really refers to jumping in and out of the market. You haven’t done anything wrong. In 12-18 months you are likely to be rewarded.

  3. Direct answer to rebalancing: if you were going to rebalance anyway, why not do it at a bargain? I personally think stocks are about to get a little cheaper, but within 12-18 months we should be getting back on track. Purchases today should look good then. YMMV

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As we all on this site are mariners, we all hope that the shipping type stocks do well. They haven’t, (For me and most others) overall been very good or horrible as a long term investment. I , again am no guru, just school of hard knocks. As we know, all these type businesses run in cycles, boom one series, hard bust in another. The only stock I hold in that area is SFL. Have held them for over 10 years. They have paid very well and have been consistent. They are on “sale again”. By no means am I making a recommendation, except stay away from most. Just my experience with maritime type stocks. I wish I would have bought more last Thursday, but have enough in that position. Had a smile on my face when the Saudi’s hired all those vlcc’s last week at 200k+ per day. I hope to quote this right “Pigs make money,Hogs get slaughtered”.

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Thank you for opening this thread up. Easily the most productive one that’s been on here in a good long while.

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I wouldn’t go that far but I do find it useful to hear new ideas & to talk about stressful & scary situations. I once read that is the reason why people like to watch horror movies & hear scary stories. Once a person verbalizes their emotions & let’s it be known to others it doesn’t have as much power & they can try to move on instead of continuing to dwell on it.

Looks like today will be another opportunity to buy future dollar bills for .40 - .50 cents. Although I did have a small amount of buyers remorse on Thursday for the money I rebalanced on Wednesday I’m going to get it over with by rebalancing my last 25% today. @CoastalTrader was right, the markets did go lower again & I wouldn’t be surprised if they go lower but I know I’ll feel better once I’m invested again & the suspense of waiting for the bottom is irrelevant.

What’s everyone think about cryptocurrency? I’ve been watching something called chainlink (everything has absolutely tanked this last week so this may also be a good time to buy). In the interest of diversifying as much as possible, I invested just a little in a possible up and comer. Money I can afford to loose but I look at it much like buying a lottery ticket.

  1. “Bulls make money, bears make money, pigs get slaughtered.”

  2. Even for “experts”, to time the exact bottom, it’s largely a factor of luck. Don’t worry about that. DO worry about the recession.

  3. Crypto is imaginary Monopoly money based on some kid doing his math homework. Warren Buffet thinks it won’t end well. An understatement says I. Blockchain technology however, is a thing in and of itself.

  4. I am a huge fan of the Motley Fool and I trust them for investment advice. Very reasonably priced as well.

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I couldn’t stand it. Bought a little more SFL today and a utility stock. Blue light special I hope. As I said before, had a decent position in SFL , but was tempted at todays price. Time will tell.

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Coastal trader, I knew that jingle was something like that about the animals. Cramer and Motley Fool are good tools. Not infallible, but good tools. Going for the longshots rarely pay off. I prefer in my corona virus risk percentage to stay the course and go with the brick by brick approach.

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Sorry costaltrader, I referenced the wrong person with the “@” when talking about you being right about the markets falling lower. But I fixed it.

About buying lottery tickets & cryptocurrencies. The differences between gambling & investing: A sane person will walk into a casino or buy a lottery ticket with the expectation of having fun & loosing money which is fine. That’s how the odds works & the majority of the time that happens. An investment is putting money in a place where historical expectation is to earn a profit eventually. There’s not enough historical data to to show cryptocurrencies as an investment for me & I don’t gamble often because I don’t have the nerves for it.

I know what you mean @SeaEagle. I feel like a kid in a candy store with only $2 to spend. Unfortunately I just spent my last quarter. But I’m going to change my 401k contribution to only buy equities. The interest rate is super low to buy bonds & stocks are just too cheap IMO.

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Cryptocurrencies, bit coins, etc. All that shit is something I have no interest or knowledge of. As far as I’m concerned that’s imaginary money floating through the air. Dividends are real, that captain Berryman I was lucky to have sailed with as a young AB said it quite simple. People have to pay their electric , phone , and water bills, no matter what happens. The power of compounding is not to be underestimated. Find the companies that operate well and don’t be greedy. You will thank yourself later. That was over 40 years ago, he passed as a very wealthy man a few years back. and donated much of his wealth to charity.

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