"Asset rebalancing" the strangest investment ever made and unfortunately, this is a strategy that we see often in 401k plans, 403b annuities, as well as in Section 457 deferred compensation plans we advise for our customers. Do not use it!
"Asset rebalancing means adjusting your portfolio parameters ... say you are planning to 15% each of your portfolio in certain areas ... health care, 15% in technology, 15% in consumer goods, 15% in financial stocks such as banks and insurance companies. Or you could have 20% in large cap stocks, 20% in small cap stocks, 20% international ... you get the picture.
Now, according to the asset re-balancing program, to investigate these parameters. Every quarter, again If, for example, the technology part of your assignment has grown and is now saying that 22% of your portfolio, rather than the original 15%, would sell to get back, that part of the line automated programs enough and money to move to another sector that has not kept to everything in balance.
The concept is to take from the table (a good idea, in theory) and profit also assign investors again the sectors that do not work. With asset rebalancing "The field" is that you could sell a group like things high and money stabbing in other sectors when they are low. Essentially
It is perfectly acceptable to "some" money off the table if things work really well. My clients know that our game plan for taking money off the table before we even start. But money stabbing in parts of the market that do not work? Hmm. A few questions pop into my mind:
1. Why do you invest in an area of the market that does not work to begin with?
2. Why would you more money in it?
There is an easier way to keep in the right areas of the markets, without re-balancing your ability quarterly your assets. And it's available to us for over 50 years, but very few people use it.
In the 1940s, Earnest Stabij (an early point and figure chart pioneer) came to the conclusion that when the markets were frothy, it seemed that every graph examined he looked great. And when the markets were low, all graphs looked abysmal. Stabij wanted some indicator that would tell when the risk in the market was high and when the risk was low him.
What Stabij came up with was the concept of "bullish percent indicator." The percentage of bullish indicator is only the percentage of shares in a group on point and figure buy signals.
When the bullish percent for a group of files is high, which means that the majority of the shares in that group already buy signals. There are only a few files in the group that links new sale signals in only a few names is left, which would allow for continued movement of that group would be able to generate higher ....
Another way of explaining a very high bullish percent lecture to a group of files is that all the money that goes into that group files ... is probably already in it.
And if you are to buy the percentage of shares signals in that group, the risk is that the offer (no question) is in control. Then the risk is greater for a loss of principal.
Using the bullish percent indicator can tell us when a group of files moved in favor and hits as a group from grace. In 2000, the bullish percent charts telling them to avoid large cap stocks and small cap stocks move in us. These indicators can also tell us to stay low risk and other sectors that are now becoming higher risk. What sectors of the market That must be pretty useful information!
Using the bullish percent indicator will tell us what areas to stay in and get out ... what instead of a computer automatically "balance" our assets per quarter! In this way we allow ourselves to stay in an industry that still run higher.
Here is a good example: in this year 2005, as oil has followed higher and higher, an automated asset rebalancing program would be gradually taking more and more of the table, instead of stabbing with a winning sector!
Thomas P. Mullooly, President of Mullooly Asset Management, LLC has more than twenty years spent in the investment world, as a broker and as an investment advisor. Mullooly Asset Management is a fee-only registered investment advisory firm based in New Jersey, specializing in retirement accounts, especially the management of 401k, 403b, and deferred compensation accounts for individuals. If you want to know which sectors your portfolio should be avoided at this time to contact us by sending an email to , call 732-223-9000 or by visiting or sign up to the market report and tips on how you can receive healthy invest your money
No comments:
Post a Comment