Often, folks on this forum will write something like - "I'm at 90/10 right now, aim to retire at age 65, and therefore plan to shift to 60/40 five years before that to mitigate against a downturn right at retirement". That makes sense at the surface, but what about if there is a market downturn right before the pre-planned rebalancing? Is there an unstated assumption of delaying rebalancing in that scenario until suitable market conditions within that five year buffer (i.e. that time period is selected such as to be adequately long enough for a high chance of recovery)?
My simplistic approach has been to draw a straight line between the current asset allocation and the future goal, and make small continuous adjustments along the way - so far, with how new contributions are invested, with the goal of staying close to the glidepath line and avoiding / minimizing any rebalancing that would have tax consequences. What are the downsides / blind spots I might not have considered with this strategy?
My simplistic approach has been to draw a straight line between the current asset allocation and the future goal, and make small continuous adjustments along the way - so far, with how new contributions are invested, with the goal of staying close to the glidepath line and avoiding / minimizing any rebalancing that would have tax consequences. What are the downsides / blind spots I might not have considered with this strategy?
Statistics: Posted by Ryzan — Mon Aug 12, 2024 10:22 am — Replies 2 — Views 97