In these discussions "up" and "down" is usually not defined and therefore meaningless.So purposefully letting your allocation drift and not rebalancing back into it?
The scenario I described is not what's happening in a TDF.
I understand that a TDF is continually re-balanced to have the desired percentages of stock/bonds/cash. But when a person withdraws from a TDF, they are withdrawing from that one fund, and, indirectly, from everything in it (stock/bond/cash). In the scenario I described, one would withdraw only from the stock fund (if it is up and the bond fund is down), or only from the bond fund (if it is up, and the stock fund is down - and lets leave cash out of this for simplicity's sake). The whole point is to give the "down" fund time to come back, rather than "selling low".
And are you defining “up” and “down” in absolute terms or relative terms?
Some options include:
1. Up or down relative to the original purchase price of the asset. That would obviously be useless here.
2. Up or down on an annual accounting, meaning relative to price on December 31 each previous year.
3. Some other criterion?
The balanced asset allocation math is not ambiguous because at every moment in time one can calculate the allocation to each asset and compare that to a standing target allocation.
Statistics: Posted by dbr — Thu Nov 14, 2024 6:25 am — Replies 23 — Views 2039