Given all the market volatility, a lot of folks are wondering about whether now might be the right time to rebalance their portfolio.
Vanguard researchers present an in-depth discussion of rebalancing in this paper. This analysis emphasizes that historically, rebalancing once or twice a year—and only doing so when a portfolio had wandered from its asset-allocation target by at least 5%—produced absolute return/risk results quite close to those resulting from more frequent, complicated, and time-consuming rebalancing efforts. The “take away” is that when it comes to rebalancing, doing it once or twice a year can be useful—and for many investors, there’s little point in making it more complicated than that.
Read more »
I’ve been investing in stocks through mutual funds for more than 30 years. I’ve known all along that periodic swoons come with the territory. I’ve experienced the October 1987 crash, the 2000–2002 bursting of the tech-stock bubble, and the kerflop of stocks accompanying the 2007–2009 credit crisis and “Great Recession.”
Even so, it’s never easy to see a fall in stocks slice into one’s retirement portfolio. But if getting older has an upside, it’s that experience has taught me some coping mechanisms.
Read more »
I read the headlines, same as you. Investors are panicking. During the drive in to work today, I listened to a radio business show. A correspondent talked about the flood of selling and the deep sense of fear in financial markets. Another expert spoke about investors cashing out and moving assets to the sidelines.
Yes, it is true that in volatile markets, there is more trading. And what is true in the markets is also true at Vanguard. In our 401(k) business, for example, the number of participants making a change in their portfolios, and the dollars they were moving, jumped five- or six-fold on the worst days for stocks. A similar pattern emerges in our retail business. These statistics are the source for headlines about shifting investor sentiment.
Read more »
Investors have every right to feel anxious about the markets.
First, we had the endless drama and squabbling over the federal debt ceiling. An agreement was reached, but before we could take a collective sigh of relief, the equity markets tumbled more than 4% last Thursday amid mounting concern over the fiscal health of several European countries. Late the following day, S&P downgraded its rating on U.S. debt from AAA to AA+ status. We worried over the weekend, and on Monday volatility was in full force, and the equity markets gave up another 6%. It’s enough to make any investor cry “uncle.”
Read more »
I was having lunch the other day with a retired colleague and friend. We catch up periodically, filling each other in on our children’s activities and our lives. This time, he really wanted to spend some talking about the retirement experience.
He’s not your ordinary retiree. In his last several years with Vanguard, he studied for and passed all the Certified Financial Planner™ exams, because he thought it would be helpful personally and as an alternate career option.
Read more »
