How do you consolidate your gains?
gif1
Posts: 42 Forumite
Hi,
Assuming that timing the market (sell high, buy low) is near to impossible, is portfolio rebalancing the only and/or best way to consolidate your (paper) gains when your holdings have been performing well and you would also want to protect yourself from the next downturn?
Are there other options?
If you rebalance, how frequently do you do that? I guess doing it too often might curb your gains?
And, for this reason, do you always hold some cash in your portfolio as a risk free (safe) asset, or fixed income might suffice?
Thank you for your answers.
Assuming that timing the market (sell high, buy low) is near to impossible, is portfolio rebalancing the only and/or best way to consolidate your (paper) gains when your holdings have been performing well and you would also want to protect yourself from the next downturn?
Are there other options?
If you rebalance, how frequently do you do that? I guess doing it too often might curb your gains?
And, for this reason, do you always hold some cash in your portfolio as a risk free (safe) asset, or fixed income might suffice?
Thank you for your answers.
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Comments
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When I was saving for retirement my assets were divided roughly 60/40 between equities/ bonds and cash. I rebalanced when either allocation was off by +/-5%. I only used a few broad trackers so I had little rebalancing to do withing asset classes.
I think rebalancing is a good thing for people to do even if it only serves the function of keeping them involved and as a psychological crutch through the ups and downs. So either do nothing or rebalance according to some predetermined criteria. Buying and selling emotionally will probably produce very bad outcomes.........FYI there is another strategy that is sort of the opposite of rebalancing by selling good performers and buying the poorer performing assets, it's called momentum investing and you buy more of the good performers when they are doing well.“So we beat on, boats against the current, borne back ceaselessly into the past.”0 -
I have 10% in cash. I review approx. every 3 months and rebalance. sell / swap the underperformers , either moving to cash or topping up winners . Try to keep the spread over 10 stocks/funds/trusts + cash and add research new opportunities and add to watch list. If all are performing I leave alone.Win Dec 2009 - In the Night Garden DVD : Nov 2010 - Paultons Park Tickets :0
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Rebalance by reinvesting income. Only buy what you intend to hold forever.0
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Rebalancing can only ever give you the chance to maintain or increase your earnings, so long as you move the right way. Unlike an interest paying cash account that clearly shows what will happen if you transfer, equities can leave you with a nasty rash.
Let us assume you have made all the right moves, and you do not want to see your gains evaporate....what then. This I believe is what you are asking. For Digger Mansions it was gold, and it was the right move.
You could choose from a whole basket of hard assets......land, property, precious gems, property, classic cars, wine, antiques, etc., etc., etc.
So, when do you move, that is a judgement call which only you can make. Then comes the next question, were do you consolidate. We chose gold because it is the easiest hard asset to liquidate, with a long track record of holding value..._0 -
This I believe is what you are asking. For Digger Mansions it was gold, and it was the right move.
When (and why) did you move to gold? I ask because over the last 5 years it has dropped in value and over the last 10 its not increased by much. I have never thought it much use as an investment0 -
Thrugelmir wrote: »Rebalance by reinvesting income. Only buy what you intend to hold forever.
What is the point of holding something forever? You can't take it with you when you die.0 -
What is the point of holding something forever? You can't take it with you when you die.
Could not agree more, at some point the aim should be to stop saving, and start spending. We are at that point and rebalancing is done annually, and combines with shifting GIA assets to ISAs, maximising out CG allowances and stripping out enough cash to supplement our pensions to do the things we want and to reduce IHT liability through gifting.0 -
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What is the point of holding something forever? You can't take it with you when you die.Keep_pedalling wrote: »Could not agree more, at some point the aim should be to stop saving, and start spending.
This probably works well if you can time your spending/depletion of savings/investments (and the income they provide) to your exact moment of death.
I feel though that Thrugelmir was instead referring to the difference between 'value' investing - buying something which will provide income over the long-term and so you are happy to hold forever, than 'trading' or even 'speculation' where you buy something and only intend to hold it for the short-term and are hoping for a rise in price.0 -
I have 10% in cash. I review approx. every 3 months and rebalance. sell / swap the underperformers , either moving to cash or topping up winners . Try to keep the spread over 10 stocks/funds/trusts + cash and add research new opportunities and add to watch list. If all are performing I leave alone.
Every three months??? So you are dealing on noise.0
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