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I drink the odd can of Coke Zero — sugar free, caffeine free. Unfortunately the caffeine free version is rarely on offer, but on those odd occasions when I discover it at a good discount I buy multiple cases. I enjoy a good bargain.
My instinct for a bargain extends to my retirement portfolio. I scratch that itch by having a policy statement around rebalancing during market volatility. Normally I only rebalance once a year, but my policy statement has a clause to enact a threshold rebalance if the equity portion of my portfolio drops more than 15% — a once and done strategy. It’s only been triggered four times in the last ten years. While it’s not a process everyone would be comfortable with, I thought you might find it interesting to see what it looked like in April 2025.
The “Liberation Day” tariff announcement triggered a tariff tantrum in global equity markets, with a corresponding drop of 15% that activated my rebalance strategy. Being a few weeks away from completing the sale of my business and entering retirement, I nearly decided not to bother, but after a few hours of contemplating I thought “what the hell” and went ahead anyway.
It’s not a difficult thing to do. I simply identified the overweight bond allocation and sold down into the underweight equity portion of my portfolio. The swap brought my asset allocation back to target with a few clicks of a mouse on the Vanguard website. I wasn’t buying the dip on a gut feeling, it was happening because my rules mandated a return to my target allocation after a 15% drop. No emotion required.
One small but worthwhile footnote: I carried out the rebalance within a tax-advantaged account, which meant no capital gains tax to worry about, the swap happened in a sheltered environment and I could act without a tax bill arriving the following spring. Whether that’s relevant to you depends entirely on your own account structure and circumstances, so it’s worth a moment’s thought before you click. The mechanics of a rebalance are simple; the type of account you do it in can matter quite a bit.
After that I ignored the market noise and political kerfuffle and got on with my life, which at that stage meant dealing with all the small hassles that come with selling a business.
So what was the outcome? It turned out there was a very small window of opportunity to capture the equity sell-off. Within three days the market stabilised and started to rebound. The capital I redeployed from bonds into stocks outperformed the rest of my equity portfolio by a margin of 20% over the following nine months, all because of a simple rebalance back to target allocation.
Would I have regretted it if I hadn’t bothered? Honestly, probably not. My portfolio was already built to carry me through retirement, the rebalance was a bonus, not a necessity. Missing the equity discount would have been a bit like walking past the Coke Zero on offer and shrugging. Nice when it works out, but the day goes on perfectly well either way.
Would I do it again? Yes, because the policy says so, not because I knew how it would turn out. The rebalance worked well this time. Next time the market might keep falling for another six months after I pull the trigger. The point isn’t the outcome, it’s having a rule you can execute without needing to be right.
I’ve since retired, sold the business, and opened a fresh can of Coke Zero. The portfolio is back to target allocation and the policy statement sits in a drawer, waiting for the next tantrum. Although, at the moment, I’m more interested in finding some discounted coke zero, my stash is running low.
I view policies such as re-balancing portfolios once a year as one step removed from simply buying and forgetting. Auto pilot investing. And that’s fine. If you approach investing simply, you’ll do well with index funds. The only policy I subscribe to, and it’s new for me, but I’m sticking with it, is one I learned by reading about Herbert Wertheim who sells individual company shares if their valuations drop twenty percent. If that happens, I must of missed something about the company or the market has turned against a company. I’ve experienced valuation drops greater than twenty percent of individual companies and in the past, I was too preoccupied to cut my losses. Not any more. I can always buy the shares again, or invest in other assets. There is always somewhere financial assets worth investing in. In bear markets, such as the one we are in, there will be rallies and that’s when you should sell. David Lancaster makes very valid remarks in his post by mentioning the long-term duration of bear markets that the US stock market has experienced. If you want to get reacquainted with how long bear markets can last, read Maggie Mahar’s superb book “Bull! : A History of the Boom, 1982-1999: What drove the Breakneck Market–and What Every Investor Needs to Know About Financial Cycles.”
The Only Three Questions That Count by Ken Fisher argues for a method for making better investing decisions by asking three core questions: “What do I believe that’s wrong?”, “What can I fathom that others can’t?”, and “What is my brain doing to mislead me?”
I think you addressed the first question. You might want to also work through the other two.
Your strategy sounds right for you, though as an index investor it’s not really relevant to my situation. I am curious about one thing though — a bear market? How did you arrive at that conclusion given the current market cycle?