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Stock Market Rebalance Opportunity Missed

Yesterday, I missed another opportunity to rebalance my 401(k) account.  I had this magic number in my head, and once I hit that mark, I swore to myself that I was going to rebalance my portfolio so that it had less exposure to the equity markets.  I was less that $1,500 dollars away from hitting that mark.

So am I going to sell out tomorrow?  No, most likely the market will recover a bit so I’ll hold on.  I don’t know about next Monday though.

I actually like it when the market is a bit choppy for a while, that enables me to buy some more shares at a lower price (dollar cost averaging).  Of course, I still want the general direction of the market to climb upwards…

In my taxable brokerage account, I still have some money on the side, but I’m not in a hurry to jump in, especially so early in the game.

The amounts in my accounts are now much more important to me, I must shift my portfolio so that I am exposed to much less risk in the marketplace.

I will still keep my speculative amount for playing in the market though, but only 10% of my entire balance.

Readers, please consider creating a balanced portfolio (a mix of mutual funds, bonds, and cash like investments) at the beginning instead of just having and agressive equity only portfolio.

-MR

UPDATE: (5/7/2010): Sounds like the problems was worsened by market orders!  This should be a wakeup call to us all that we should always use limit orders when making trades!  The markets still doesn’t know what happened yesterday.  They do believe that with the complex electronic system being used, a cascading effect took place.  I have to wonder if the uptick rule mechanism would have prevented this from happening?  The flaw would still be there, but perhaps the uptick rule would have short circuited the damage.

10 Responses to Stock Market Rebalance Opportunity Missed

  1. Just curious about your system, as I do something different.

    For myself, I pretty much rebalance by adjusting stock/bond ratio based on my age. I know some people really pulled out of stocks about 18 months ago when things got pretty scary but I did not. That’s when I usually buy a little more, if I have anything to buy with.

    So do you adjust your holdings based on market conditions and age?

    Something for me to think about for sure!

  2. @Kris
    Ironically, I’m familiar with the technique you described (and have even blogged about in the past :)), but I’m not currently following it. 95% of my 401(k) money is still in diverse equity mutual funds (large cap, small cap, international…).

    I know this isn’t the best allocation, and my portfolio desperately needs rebalanced (equity, bonds, cash equivalents). I was close, very close to doing it (and I still might next week if things recover, which I think they might).

    During the recession, I ran against the grain and increase my contribution rate to my 401(k). It was a good move, but now I really need to rebalance to get in line which the modified age based allocation model (which is 110 – current age).

    Sounds like you are doing the right thing! Good job 🙂

  3. buy low sell high thats the oldest rule in the book right?

    to do this you definitely have to have money in your account ready to make trades with. i find that sometimes i see a great opportunity and realize that i have to transfer money first and that is going to take 2 the 3 days and it always bums me out cus i feel i might miss a great opportunity.

  4. @James
    lol, yeah, I have that same problem, or I’ll be in a stock that’s starting to climb, and then I see another stock that look great too, but I only have so much play money to speculate with. Bums me out too… Dow Chemical was one such stock last year… And it’s climbed nicely from it’s lows. I no longer consider it the sweet deal that it was…

  5. not to worry, rebalancing opportunities come up many times a year. You will get your chance

  6. Hi, Found you through the Yakezie digest and am glad i did. You write beautifully, very easy to read. I was going to do some rebalancing last Friday (5/7/2010) after returning from a business trip to Canada. After I saw the turmoil, I decided that was not the way to go!!
    That’s why I always advise only long term cash to go in the stock market???

  7. @Barb Friedberg
    Thanks for the kind words. Hopefully, the market will come back, but if it doesn’t I’m primarily playing with money I can let sit for a year or more 🙂