Replies to post #14116 on A.I.M. Users Bulletin Board (AIMUSERS)

[OldAIMGuy]

Hi Don, Re: Rebalancing.....

I haven't formulated a strategy. Every couple of years I plan on reviewing my IRA holdings and see if the Equity/Cash ratios make sense relative to the I-Wave. I also plan on reviewing some other aspects as well, such as whether I should add a new components or not.

In this most recent case, I reviewed each holding's Equity/Cash reserve level and decided three of them were out of whack. All three were showing over 40% cash while the IW was requesting only 31%. It's been two years since I started this new fund retirement account structure and I felt it was time to take a look at this. One was still selling at a reasonable discount from the beginning of the year, so I shifted the Equity/Cash ratio to the IW's suggested level. The other two didn't look timely for doing so as their prices were still pretty rich.

The surplus cash of the two other components I might spin out to start a new investment. Trouble is the one component that I would like to add (REITS) isn't low priced enough to justify starting a new component. Maybe next year.....

Best regards, Tom

[lostcowboy]

Hi Don nice to see you up and around. I hope your Florida bungalow and car survived the last hurricane!

[Toofuzzy]

Hi Don

>>>>>With regard to rebalancing, what % would you let cash drift away from the IW suggested ratio before rebalancing?<<<<

I may be reading a LOT more into your quetion but:

The purpose of rebalancing is NOT to deal with the cash reserve(Vealies can do that) but the difference between different AIM accounts.

Let's say you own 10 sector ETF's so idealy each is 10% of your portfolio. After a few years of AIMing one or two are only 5% each and one or two are 15% of the total portfolio, then you could say it is time to rebalance.

If your goal is to have 10% of each maybe you use a target range of 8%- 12% (value of both stock and cash) that you are willing to do nothing. It SHOULD take a few years before you need to rebalance if you are also AIMing.

I suppose you can just steal the cash from one funds reserve. Another way would be to sell more of one when AIM says to SELL and buy more of one when AIM says to BUY. I haven't really thought the mechanics out.

Toofuzzy