As I start typing (February 4, 12:37PM
PST), the Dow Jones Industrial Average is down 256 points (2.49%) for the day. Year to date, it is down 3.97% and financial pundits everywhere are
making gloomy noises about the economy and the stock market. Right
now, I'm thinking I have pretty good timing as I put extra money into
stocks right about the low point in 2008 and rebalanced out of stocks
the past 3 months at roughly the same 10500 peak level.(I may just
have good luck but that's another topic for the future.) Of course, if the market reverses yet again, I will have egg on my face for writing this entry.
But I wonder what kind of impact my moves really had. Is moving around a few dollars making significant changes or am I just psychologically patting myself on
the back? To find out, I decided to get a historic analysis on my
stock/bond balance. Luckily, I developed my own website tool to track and analyze my portfolio so I have the numbers readily on hand. After putting the numbers in OpenOffice:
My quick thoughts upon looking at this
graph:
- 1996 to July 2006 - I was 100% stock.
Hence, I've cut out those preceding 10 years from the graph.
- August 2006 - I sold all my activity
managed funds and moved everything to Vanguard. At that time, I
figured I needed some bonds but really didn't have any concrete idea
on what percentage.
- February 2007 - After receiving my
1099s for 2006, I realized holding bonds in taxable accounts
meant tax bills every year. I sold the taxable
bonds and then bought back in my IRA accounts a month later -- hence the spike up
- January 2008 - I sell stock (in addition to the cash I had on hand that was destined for stock) to make a loan to my company while we're have technical troubles with our credit line. The graph shows about a 4% drop in the stock percentage for that month.
- June 2008 - Talk of $200 oil dominates the investment world.
- September 2008 - Lehman Brothers and AIG.
Market took a big correction and I responded by moving even more from
bonds to stocks. I also sold half of my commodities position after oil starts following the stock market down. I got out with a profit but missed the peak waiting for long-term capital gains period. These transactions case the stock spike up for the month of September.
- October 2008 to January 2009 - Turns
out my stock additions were too soon. The market dropped twice the amount I
rebalanced into stock.
- February 2009 to March 2009 - I fish
into my sofa for spare change and put 50% more into stock than my
September 2008 transaction.
- April 2009 to August 2009 - Whew,
market rebound. I don't think I had any spare cash left to double
down again -- at least not if I wanted to pursue my current overseas
opportunities.
- July 2010 - I sell some stock to fund my overseas office.
- November to January 2010 - I rebalance in several accounts now that I'm no longer "selling
at a loss".
In retrospective, I have not been following a disciplined buy-and-hold plan with rebalancing. Instead, I have a bit of gambling tendency in me. My saving grace is:
- I make relatively small bets
- My tendency is to go against the trend
- I have good luck
The moral of the story here is if you read up on what I'm doing, don't follow me my direction blindly (if at all). My investing ideas are for informational purposes only as my goals may not be the same as yours (more on this in a future entry) .
(Filed in investing)
A look back on asset allocation mix
Posted by Mossy
February 5, 2010 6:40 AM
But I wonder what kind of impact my moves really had. Is moving around a few dollars making significant changes or am I just psychologically patting myself on the back? To find out, I decided to get a historic analysis on my stock/bond balance. Luckily, I developed my own website tool to track and analyze my portfolio so I have the numbers readily on hand. After putting the numbers in OpenOffice:
My quick thoughts upon looking at this graph:
- 1996 to July 2006 - I was 100% stock.
Hence, I've cut out those preceding 10 years from the graph.
- August 2006 - I sold all my activity
managed funds and moved everything to Vanguard. At that time, I
figured I needed some bonds but really didn't have any concrete idea
on what percentage.
- February 2007 - After receiving my
1099s for 2006, I realized holding bonds in taxable accounts
meant tax bills every year. I sold the taxable
bonds and then bought back in my IRA accounts a month later -- hence the spike up
- January 2008 - I sell stock (in addition to the cash I had on hand that was destined for stock) to make a loan to my company while we're have technical troubles with our credit line. The graph shows about a 4% drop in the stock percentage for that month.
- June 2008 - Talk of $200 oil dominates the investment world.
- September 2008 - Lehman Brothers and AIG.
Market took a big correction and I responded by moving even more from
bonds to stocks. I also sold half of my commodities position after oil starts following the stock market down. I got out with a profit but missed the peak waiting for long-term capital gains period. These transactions case the stock spike up for the month of September.
- October 2008 to January 2009 - Turns
out my stock additions were too soon. The market dropped twice the amount I
rebalanced into stock.
- February 2009 to March 2009 - I fish
into my sofa for spare change and put 50% more into stock than my
September 2008 transaction.
- April 2009 to August 2009 - Whew,
market rebound. I don't think I had any spare cash left to double
down again -- at least not if I wanted to pursue my current overseas
opportunities.
- July 2010 - I sell some stock to fund my overseas office.
- November to January 2010 - I rebalance in several accounts now that I'm no longer "selling
at a loss".
In retrospective, I have not been following a disciplined buy-and-hold plan with rebalancing. Instead, I have a bit of gambling tendency in me. My saving grace is:- I make relatively small bets
- My tendency is to go against the trend
- I have good luck
The moral of the story here is if you read up on what I'm doing, don't follow me my direction blindly (if at all). My investing ideas are for informational purposes only as my goals may not be the same as yours (more on this in a future entry) .(Filed in investing)
Leave a comment